When compared with the neighbouring countries, Sri Lankan per capita electricity consumption is relatively low creating potential for growth in demand within the next three years, which will see many small players participating in this sector, according to stock market analysts.
“Most of the large hydropower reservoirs have already been used in the power generation process which is why there is more scope for the small power plants to enter into the business,” an analyst said, adding that there will be increased participation from the private sector in the future power generation process.
According to data, the government has initiated several projects to meet the rising demand which includes Broadland Hydro Power Project (to be completed by 2014), Sampur coal fired power station (1st stage 8208 2014), Upper Kotmale hydro power project (to be completed next year) and Puttalam coal power plant (1st stage – 2011).
“Electricity demand which is closely linked to the country’s GDP growth is expected to rise in the coming period due to the revival in the economic activities in the country. Currently the country is heavily dependent on thermal power sources and by the end of 2009 the household electrification would be 85.4%,” Subhashi Jayasumana, Analyst SMB Securities said. She added that hydropower companies have recorded improved earnings in the recent past, which is another attraction into this sector.
“The better tariff rates, increased power generation has resulted in the increased earnings and their strong balance sheet position is backed by the low gearing levels. Relatively stable cash flows and profit margins, relatively high life span of the assets can be identified as few industry specific characteristics among others,” she said, noting that the initial investment required to operate the power plant remains low. As per the 2009 Central Bank report 86% of total households have electricity and per capita electricity consumption is 412.8 Kilowatt per person. Sale of electricity is categorized into four sectors of the economy namely industrial, general, domestic and religious and other. The electricity consumption of the industrial sector superseded the domestic and religious sector until 2006.
However, this pattern has gradually changed and now household and religious sector have come up to the top of the list with a 5.6 % growth compared to 2008.