Hemas Power Ltd, a subsidiary of Hemas Holdings PLC is looking to acquire ‘ready-to build’ power projects, according to officials.
Managing Director at Hemas Power Krishan Nanayakkara told the Sunday Times FT on the sidelines of a press conference this week to launch Hemas Power IPO (public share issue), that the company is already negotiating two to three acquisition options in this regard. Hemas is planning to raise Rs. 626 million for new investment in renewable energy projects through the sale of 31.3 million shares.
Mr. Nanayakkara noted that the company has embarked on developing a diversified portfolio of power projects consisting of both thermal and small-hydro based plants. The current capacity of the company is 102 MW and supplied approximately 7% of the total electricity consumed in 2008 in the country.
"It is a 25% issuance of Hemas Power shares at Rs. 17 to Rs. 20 per share and we feel this IPO has great potential as the power sector has great promise, "Vajira Kulatilake, Managing Director NDB Investment Bank, whose firm manages the share issue, noted.
He said that the key objectives of the issue are to raise funds for the construction of the Magal Ganga Small Hydro Power Plant (SHP) and the acquisition and development of other projects. The company initially consisted of the Heladhanavi thermal power plant (under Heladhanavi Ltd). Currently the company is shifting towards the small-hydro power sector with two more power projects, namely Giddawa (under Giddawa Hydro Power Pvt Ltd) and Magal Ganga SHP (under Okanda Power Grid Pvt Ltd).
Mr. Kulatilaka said, "The steady cash flows expected to be generated through the existing power projects enable the company to maintain a high level of dividends. It will also give investors the opportunity to benefit from the growth of its new power projects, which have not been factored at present." He added that the profit margins are higher in the small hydro based power plants due to low operational costs..
Industry analysts said that there is a large opportunity in power projects as the competition is non-existent.
“Also there is a steady income generation due to the presence of a guaranteed buyer which is the Ceylon Electricity Board,” an analyst said.
Hussein Esufally, CEO Hemas Holdings, noted that the company has technical and management expertise in building and operating thermal and small-hydro power plants which is a core strength in launching this IPO.
"Inflation has dropped, interest rates have declined and the Gross Domestic Product is expected to reach 7% to 8% by 2011. As such this is the best time to have this IPO," he added.