Hemas ups stake in Panasian Power to 29.3% with Rs. 300 m investment

Hemas Group has increased its stake in Panasian Power Plc (PAP) to 29.3%, following an investment of Rs. 300 million yesterday in a bid to expand generation capacity in the renewable energy sector.

The increase in stake was via the acquisition of a 20% stake or 100 million shares at Rs. 3 yesterday by Hemas Power Plc from Power Hub International SDN BHD, Malaysia, one of the promoters of PAP. The foreign party held a 23.4% stake previously. Net Asset Value of PAP is Rs. 1.50 per share while at Group level it is Rs. 1.60 per share. Its 52-week highest share price was Rs. 3.30.

Prior to yesterday’s purchase, Hemas Group held a 9% stake via related parties Okanda Power Grid Ltd. (36.2 million shares or 7.24%) and Upper Agra Oya Hydropower Ltd. (10.3 million shares or 2%). PAP boasts 12 MW mini hydro power capacity and has made some recent acquisitions as part of its quest to have a base of 15 MW. As at end FY12, Hemas Power had an aggregate hydropower capacity of 7MW with the addition of 2.4 MW via Magal Ganga hydropower project. A 3MW biomass plant is also in progress.



PAP acquired Manelwala Hydropower Ltd. on 31 August 2010 for a consideration of Rs. 565 million. Mid last year the company’s shareholders approved an offer made by Padiyapelella Hydropower Limited to acquire a 90% stake of that company for Rs. 910 million. Advance payment of Rs. 104,250,000 has been paid by the Group at the end of third quarter 2012/2013.

Further, expansion activities of Rathganga power plant by one MW commenced during the financial year 2012/2013.

As per PAP’s 2011/2012 Annual Report, the company’s foray into mini hydro was via two phases. Phase 1, consisting of a 3.6MW power plant, is nearing completion stage of construction and is expected to commission its commercial operations by third quarter of 2012/13.

In addition, necessary licenses have already been obtained for the Phase 2, consisting of 3MW, which is yet to commence construction.

With the BOI status, PAP will enjoy tax holidays for the first five years from its commercial operation. The Standardised Power Purchase Agreements signed with the Ceylon Electricity Board are based on the newly-introduced Non-Conventional Renewable Energy (NCRE) tariff system.

Phase 1, which is fed by the Belihuloya catchment area of 75km2, is expected to generate 12.5GW per year. Further, the company is in the final phase of obtaining approval for the sale of carbon trading, which will bring in another Rs. 70 million per year income to the company.

In February last year PAP invested Rs. 40 million in Panasian Investments Ltd., to focus on strategic investments.

PAP in the first nine month of FY13 had seen its net profit down to Rs. 71 million from Rs. 82.5 million a year earlier whilst at Group level it was down to Rs. 53 million from Rs. 74 million.

Hemas Power on the other hand recorded a consolidated net profit of Rs. 98 million and Rs. 221 million for the quarter and nine months ended 31 December 2012 respectively as per SLAS.

This is a 20% increase and 10% decrease over the corresponding periods of the previous year, whereas as per SLFRS/LKAS, the company’s net profit stood at Rs. 76 million and Rs. 211 million for the quarter and the nine months period respectively. The statement of comprehensive income for the quarter and nine months period were recorded at Rs. 95 million and Rs. 241 million respectively.

The increase in profits in the third quarter primarily arose from the good performances of the hydropower sector notwithstanding the two-week long suspension of operations at the Giddawa plant due to floods. The Giddawa plant was affected by heavy flooding in the area, but the tireless efforts of the plant and the engineering teams restored its operations within a fortnight.

At the same time the generation from the Magal Ganga Plant, which was added to the Hemas Power operational project portfolio last year, also helped the hydropower sector record a 33% increase in energy generation over the corresponding quarter of the previous year.

Hemas Power’s thermal sector profits for the quarter increased by 73% to Rs. 52 million compared to the corresponding quarter of the previous year. This mainly arose from the reversal of a portion of exchange losses charged in the previous quarter.

However, the exchange losses and the higher finance charge on the rupee borrowing brought down the nine months profits of the thermal sector by 13% to Rs. 145 million. The bulk of this exchange loss was a translation loss that arose from having to mark‐to‐market its USD borrowings and does not have any cash‐flow implication whatsoever.

On the revenue front, Hemas Power’s consolidated revenue increased by 23% to Rs. 1,280 million and by 42% to Rs. 4,470 million for the quarter and the nine months period. This improvement is primarily attributed to a 44% increase in Heladhanavi revenue and 31% increase in revenue in the hydropower sector.

The thermal sector revenue increase was largely a result of the pass‐through effect of the furnace oil price increase from Rs. 40 to Rs. 65 per litre in February 2012, whereas the increase in hydropower sector revenue stemmed from higher energy generation assisted by a healthy north‐east monsoonal rains and the contribution of  the Magal Ganga plant.

On the growth front, the progress of pre-development work of Hemas Power’s new projects in the country and in the East‐African region is currently moving on track, the company said in a statement accompanying interim results for the third quarter of FY13.