LVL Energy Fund seeks Rs.1.2bn in new listing

• Funds aimed at settling loans and investing in energy projects, home and abroad
• Issue price of Rs.10 almost double the net asset value per share
• Subscription list opens up on Dec.14 and is managed by Acuity Partners

Sri Lanka’s LVL Energy Fund Limited, a company that invests in renewable and thermal power projects across Sri Lanka and beyond, last week announced they were seeking a listing on the Colombo Stock Exchange.

The company, which was set up in June 2006 under Lanka Ventures PLC—a leading venture capital firm in the country—to invest in a broad range of energy projects, will issue 120 million ordinary voting shares at Rs.10 each. The issue price is about twice the net asset value of the company as the net assets per share as of June 30, 2017 stood at Rs. 5.21.

The issue, which has received the green light from the CSE, will open up for subscription on December 14 and will be managed by Acuity Partners Private Limited. 

LVL Energy Fund is a sub-subsidiary of Acuity Partners as it holds 80 percent in Lanka Ventures PLC.  

Acuity Partners is a joint venture between DFCC Bank PLC and HNB Bank PLC and the CEOs of both banks sit on the board of LVL Energy while the Chief Executive of the latter, Jonathan Alles, is the Chairman of the company. 

Sumith Arangala, an engineer by profession, with expertise in private equity and venture capital is functioning as the Chief Executive of LVL group. Arangala was the Chief Executive of Lanka Ventures from 2002 to 2016.   

The funds will be utilised to settle Rs.480 million of loans and the balance Rs.720 million will be invested in projects.

LVL Energy Fund was incorporated with an initial capital of Rs.300 million and since had several rounds of fund raisings through equity and cumulative preference shares bringing the total fund base up to Rs.2, 482 million by September 30, 2017.

However in recent times, the borrowings rose to Rs.838 million and started weighing on the performance due to rising interest rates.  

“The average borrowing rate in 2016/17 was 11.09 percent compared to 7.92 percent in 2015/16”, Alles said in his annual review to the shareholders in August this year. 

LVL has sizeable equity stakes in hydro, wind and thermal projects in Sri Lanka, Bangladesh and Nepal, which are either subsidiaries or mostly associate companies as the stakes, in most cases, are less than 50 percent. 

The company plugged its 1.2 megawatt Campion hydropower plant in Kehelgamuwa Oya in Bogawantalawa in Nuwara Eliya district to the national grid this April and the 2.5 megawatt Bambarapana Hydropower Plant across Uma Oya in the Badulla district was scheduled to be added to the grid in October. 

The company operates two thermal power plants in Bangladesh, which are making a positive contribution to the group bottom line. 

Meanwhile, the company is planning a 10 megawatt hydro power plant in Nepal, for which LVL had proposed US $ 3.0 million investment for a 45 percent stake. 

The company also won the bids for power plants in Bangladesh and Jaffna Peninsula and the company is hopeful of robust financial performance based on diversification, geographic location and energy source. 

The issue prospectus will be available for the investors from November 29.

For the quarter ended June 30, 2017 (1Q18), LVL group reported earnings of 33 cents or Rs.138.4 million compared to 59 cents or Rs.247.4 million reported in the comparable period last year as the hydro power performance was affected due to the prolonged drought.