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  • Sector - Power & Energy

    Just ran a basic analysis encompassing most of the listed companies.
    I have excluded one player Mackwoods PLC.

    We need too analyse who will have the growth potential.
    There is a complain or lets say serious concerns for the investors that the tender procedural s are not that attractive. which is quite understood.
    Some SPPAs are coming to an end their term of 15 years, after which the the rates are not attractive.
    Lotus Power/VPEL to affect with regard to reduced tariff system.
    And unfavorable tariff structure and operating terms after the lapse of 20Year casting uncertainties to the stakeholders.
    Key catalyst for some companies would be to identify new markets instead concentrating wholly within Srilanka.
    VLL, LVEF have ventured out and getting greater strides in their earnings.
    "The best values today are often found in the stocks that were once hot and have since gone cold"

  • #2
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    "The best values today are often found in the stocks that were once hot and have since gone cold"

    Comment


    • #3
      FUTURE - Pan Asian Power
      Established in 2002.
      Has 3 Mini Hydro Power Plants.
      They target 30MW generation capacity by 2022.
      Looking to increase Hydro power share, with interest to solar.

      1. Padiapalalla Plant commission 2017/03 for 3.5MW with capacity now increased to 8.9MW in Hydros.

      Phase 2 of the above to be initiated. after relauch lapsed approvals.

      2. Soar power rooftop project with 1.2MW completed and another ground solar project to start construction by 2018/09 with capacity of 1MW. And a further rooftop solar project 3.7MW will be completed by end of 2018/19/ FY. Solar power generation to increase to 5.9MW.

      3. They also plan to add 0.8MW to solar totalling 2MW in Solar, bringing total capacity to 10.9MW (8.MW Hydro and 2MW in Solar)

      They plan to increase bottom-line to 300 million by 2020 with the addition of new projects stated above.
      With this target they plan to increase bottom line by 78 mil compared to 2017/18 NP.

      At CMP 2.90 this will translate to PER below 5.

      Revision of IR Act posed challenge to the company, as some concessions extended to renewable energy is now revoked. So means no tax holidays for new projects.
      Energy tariff on a declining trend.
      Ample potential for hydro and solar power generation.

      So bottom line could be tripled by 2022.

      Challenges :
      Implementation of policy is required although has a national vision.
      Renewable Energy Act does not support Hydros favourable.
      Infrastructure development is very slow although many hydro projects in pipeline.
      delays in obtaining approvals.
      Looking for LT tariffs
      unable to compete with foreign bidders, as locals can not match the scale.
      Pressing need for green financing at a rate 8-10% for solar and other renewable energy projects.

      "The best values today are often found in the stocks that were once hot and have since gone cold"

      Comment


      • #4
        Remarkable - Vidullanka
        Incorporated in 1997, VLL has 11 MHPPs locally and 1 in Uganda.
        Totall installed capacity 27MW, with potential estimated power generation 107.5GWh.
        VLL was reaffirmed with ICRA A-(SL) in 2018.
        Output increased from 48.5GWh to 92.6GWh in 2018

        Key Milestones;
        2001 commissioning 3.2MW Bambarabatuoya (SPPA to be renewed)
        2017 2MW Batathota
        2010 1.2MW Ganthuna
        2012 800kW Haloya
        2013 1.3MW Wembiyagoda, 2.5MW Madugeta.
        2014 4MW Lower Kotmale
        2015 1.75MW Rideepana
        2016 2MW Ethamala Ella
        2017 6.5MW Muvumbe SHPP (1st Overseas)
        2017 1.4MW Udawala

        2018 Construction 3.3MW Dehiattakandiya Dendro in progress (22Gwh) Bio Mass
        2018 Acquired Timex Bukinda hydro to develop 6.5MW in Uganda. (27.4Gwh) construction to commence in the latter part of the year (SPPA with Ugandan govt already signed)

        Recorded the highest PAT in 2018, 509 Mil. 382.4Mill attributable to Muvumbe (EU Grant 352mil + from power generation)
        35% of revenue of 2017/18 was from its oversea operation.

        VLL is exploring further hydropower projects in Africa.
        Also planned to establish strategic alliances with renewable and green funds.

        VLL striving to expand into Wind and Solar.
        However CEB is not keen to add Wind capacity to the Grid.

        Next growth cycle to come from 2nd International project.
        "The best values today are often found in the stocks that were once hot and have since gone cold"

        Comment


        • #5
          Powering Life - VPEL
          Cumalative capacity 21.85MW that outputs 82GWh.
          Largest listed entity.
          VPEl pursuing investment opportunities in renewable energy projects in the Asia Pacific and African region.

          2004 Erathna 10MW 42GWh (Revenue attributable 55% as per 2017/18) please see page #86 of VPEL AR.
          2012 Denawaka 7.2MW, 25GWh
          2011 Kiriwaneliya 4.65MW, 15GWh

          Key Challenges;
          The Erathna Mini Hydropower project will complete its 15 year SPPA in July 2019, and we have been informed that an additional 5 year extension will be granted us - subject to the fulfilling of other requirements for the extended period - under the 3 tier tariff structure which provides 20 yearSPPAs to renewable energy plants commenced after 1st January 2012. Remuneration on this extension however, will place your Company on the final tier of the three- tier tariff structure since we are nearing completion of the first 15 years of operations. This will mean that the tariff we will be remunerated on will be only onethird of the avoided cost tariff we presently enjoy, which will reduce the Company’s revenue by a substantial two-thirds.

          This will have a significantly negative impact on the Company’s bottom line. Denawaka Ganga and Kiriwaneliya have a further 9 years of operation before their SPPAs falls due. Only with government support can the Company sustain its business in such scenario.

          It is a fact that new renewable energy projects under the current tender procedure are not profitable at present. This should also be re-looked at if sustainable and long-term investment in mini hydro power is to be promoted.

          The avoided cost based tariff dropped by 5.45% in the dry season to Rs. 15.43 during the year 2017, from Rs. 16.32 per unit in the previous year and by 5.27% in the wet season to Rs. 13.47 per unit from Rs.14.22 per unit in the previous year.will will

          If we re-worked the numbers of 2017/18
          Assuming Erathna contribute 55% to company's NPAT, then 835Mil *55%x 1/3 (3rd tier) Approx 152 Mil + remaining 45% from the other 2 will generate 835 mil*45%= 375 mil.
          Will result around 527 mil net earnings instead 835 mil.

          All this is assuming weather stays favorable as same as 2017/18.
          "The best values today are often found in the stocks that were once hot and have since gone cold"

          Comment


          • #6
            Lotus power, Resus and Pan Asian Power are the bottom 3 companies, in this sector. So far i have eliminated PAP and Lotus for the investment thesis. Havent read fully Resus, i think they mainly looking at small capacity of MHPPs So will give another go today. The PAP n HPFL net earnings are too low even after another couple of years. Unless a takeover to consolidate ones share. Hence my decision to remove these 2 companies.
            "The best values today are often found in the stocks that were once hot and have since gone cold"

            Comment


            • #7
              Will update with key points of Resus, in the respective thread. Can we look at some possible candidates in a takeover bid to strengthen the future and stability of the mother company. Can we see the unseen.
              "The best values today are often found in the stocks that were once hot and have since gone cold"

              Comment


              • #8
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                Hope this will help to understand the diversity.
                Dont see major expansion drive by Lotus Power (HPFL) & Resus.
                VPEL dont see any upcoming projects, except Lotus Power plan to proceed with Phase 1 and Phase 2 of Halgranoya.
                "The best values today are often found in the stocks that were once hot and have since gone cold"

                Comment


                • #9
                  Lotus Hydro Power (HPFL)
                  New Projects - Halgranoya Ps 1 & 2 to be initiated again after lapse of licenses.
                  No major power plants to be commission in the upcoming year or any foreign (not sure if they have the necessary funds and expertise unlike VLL and LVEF)

                  There are 4 existing MHPP with total capacity of 4.9MW.
                  Somehow i see some impairment provision carried out to the tune of 31 million at company level.
                  Thats a concern for me. Just that 3 projects do not expected to generate enough returns to justify the the Investment.
                  This is where diversification come in handy and other geographical markets could be a game change similar to VLL and LVEF and for VPEL if they are successful.

                  Out of the 4 MHPP, one project (2 plants including Sanquhar nearing the completion its initial15 Year term, thereafter they will be on final tier tariff system)
                  This will have adverse impact to the groups performance. As similar to VPEL it will be categorised under the 3 tier tariff system for the next 5 years.
                  Thereafter uncertainty would prevail.
                  But i think GOSL will ensure continuity.

                  "The best values today are often found in the stocks that were once hot and have since gone cold"

                  Comment


                  • #10
                    Resus Power
                    5 MHPP presently with total cap of 9.9MW
                    2 MHPP under development cap of 2.6MW
                    2 Solar PP under pre-development stage cap of 2MW
                    1 MHPP under feasibility MW capacity is Unknown

                    It has been highlighted by many developers the cost of borrowing is very high and the access or need for low cost funding.
                    Few pressure groups asserting CEA to halt ongoing projects, and granting new approvals.
                    CEB ceased to entertain new applications for small hydropower projects and other renewable projects under feed-in tariff system over interpretational ambiguity in provision Electricity Act.
                    As a result GOSL buys emergency power at high prices.
                    Feed-in tariff applicable to NCRE (non conventional renewable energy) has not been revised since 2012.

                    I wish this year budget will give some serious thought to rectify these matters.


                    "The best values today are often found in the stocks that were once hot and have since gone cold"

                    Comment


                    • #11
                      The 3 shares i like to concentrate inthis sector are VPEL, VLL and LVEF in no particular order.
                      "The best values today are often found in the stocks that were once hot and have since gone cold"

                      Comment

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