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FINANCIAL CHRONICLE™ » FINANCIAL CHRONICLE™ » PAP will take over by Hemas Power

PAP will take over by Hemas Power

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21PAP will take over by Hemas Power  - Page 2 Empty Re: PAP will take over by Hemas Power Sat Mar 16, 2013 8:14 am

knockknobbler


Manager - Equity Analytics
Manager - Equity Analytics
@rainmaker wrote:
@stockboy wrote: .
.......................
. You see SL has about 250 small power producers. The CEB brought out an agreement on Small Power Producers that makes the below 10MW ones run at losses.
............................
Would you please clarify the above statement ?
On what basis, did you arrive at that conclusion ..."run at losses " ?

22PAP will take over by Hemas Power  - Page 2 Empty Re: PAP will take over by Hemas Power Sat Mar 16, 2013 8:16 am

rainmaker


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
@Gaja wrote:
@rainmaker wrote:
@stockboy wrote: HP WILL TAKE OVER PAP BY NEXT WEEK AT PRICE AROUND RS 3 AND 3.5.I HEARD THAT AGREEMENT HAS ALREADY SIGN . HEMAS WILL BUY AROUND 30% OF PAP AS FIRST STEP.

I don't think it will be at the above price. If it does occur I will not be surprised as the talks have been on for a long time.

However note that PAP was an extreme disappointment as the top shareholders and directors sold a lot at 8-9/=. Even Emagewise bought at 6/= and sold at 8-9/=.
Even the respected Deepal Sooriyaratchi sold his block at 8/=. Now the Berhad owns 23% with retailers owning 70+% of the stock. If a mandatory occurs, I doubt it will achieve anything given the holding loss of the current 70%. Shocked

---------------------------------------------------------------------

Closer look at Power:

I know most of you are big time speculators but I will tell you why this will occur at some point in time. You see SL has about 250 small power producers. The CEB brought out an agreement on Small Power Producers that makes the below 10MW ones run at losses. The above 10 MW can negotiate the terms of the contract.

PAP has the agreement till 2023 and hence you can't expect too much in the projections.

http://www.pucsl.gov.lk/english/wp-content/themes/pucsl/pdfs/Licensee-List.pdf



See the attachment above to see the entire list. Consolidation has to occur.



Yes Hemas is looking for the companies, but i don't think they will buy a company, unless they are certain they can take the control the management

I can't totally agree with this. PAP is a serious power producer. The Senok and the other ones are affiliated to some PEPs with connections to the top. They won't sell out.

The mistake the CEB was the national grid concept that meant that Country load must be taken on by everyone. What is better is regional load coming from regional power producers (like Jaffna during the wartime). The current system results in wastage as power from Moneragala is nothing when it comes to Colombo ---> power is lost in transmission

23PAP will take over by Hemas Power  - Page 2 Empty Re: PAP will take over by Hemas Power Sat Mar 16, 2013 8:21 am

rainmaker


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
@knockknobbler wrote:
@rainmaker wrote:
@stockboy wrote: .
.......................
. You see SL has about 250 small power producers. The CEB brought out an agreement on Small Power Producers that makes the below 10MW ones run at losses.
............................
Would you please clarify the above statement ?
On what basis, did you arrive at that conclusion ..."run at losses " ?

See my other post about the revised tarrif in Nov 2012. Anyway I think PUCSL wants to reduce the rebates given for capital costs.

This is because a few people just put pathetic turbines across a small catchment to produce electricity. They got nothing much by selling 1 MW but they got massive capital cost rebates by quoting ridiculous figures for building them............

Have you noticed that the PAP stated capital (capital raised from the IPO + initial capital) is very close to the capital raised from the IPO -> initial capital outlay to set up PAP was not as high Wink

24PAP will take over by Hemas Power  - Page 2 Empty Re: PAP will take over by Hemas Power Sat Mar 16, 2013 8:39 am

Kithsiri


Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
@keeper wrote:If it true Stockboy will GOODBOY.... Embarassed
If it is not true, then how would you call him ? Shocked

25PAP will take over by Hemas Power  - Page 2 Empty Re: PAP will take over by Hemas Power Sat Mar 16, 2013 8:48 am

stockboy


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
I AM SURE THAT MANDATORY OFFER WILL NOT TRIGGER AT THIS STAGE . HP WILL BUY LESS THAN 29.5% .

26PAP will take over by Hemas Power  - Page 2 Empty Re: PAP will take over by Hemas Power Sat Mar 16, 2013 8:52 am

ccsentha


Vice President - Equity Analytics
Vice President - Equity Analytics
will softlogic buy?

27PAP will take over by Hemas Power  - Page 2 Empty Re: PAP will take over by Hemas Power Sat Mar 16, 2013 9:02 am

sandunj


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
There is a rumour abt this . Hemas power having a interest about Pap. bt dont know the when its going to happen and a M.O. Bt this info really useful.

28PAP will take over by Hemas Power  - Page 2 Empty Re: PAP will take over by Hemas Power Sat Mar 16, 2013 9:07 am

stockboy


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
soft-logic is not a major shareholder but ashok pathirage has 24.5 m shares which is 5% of the company Malaysian party will not sell its 23% stake they will sell part of that. wait for announcement by next week

29PAP will take over by Hemas Power  - Page 2 Empty Re: PAP will take over by Hemas Power Sat Mar 16, 2013 1:55 pm

knockknobbler


Manager - Equity Analytics
Manager - Equity Analytics
@rainmaker wrote:
@knockknobbler wrote:
@rainmaker wrote:
@stockboy wrote: .
.......................
. You see SL has about 250 small power producers. The CEB brought out an agreement on Small Power Producers that makes the below 10MW ones run at losses.
............................
Would you please clarify the above statement ?
On what basis, did you arrive at that conclusion ..."run at losses " ?
See my other post about the revised tarrif in Nov 2012. Anyway I think PUCSL wants to reduce the rebates given for capital costs.

Searched, couldn't find a post in Nov 2012. (Probably that may be under a different name)
Any way, first time I heard , a rebate is given to power producers by PUCSL based on capital cost. Are you sure?
According to my knowledge ( gathered about 5 years back),
1. the payment to power producer is based on the amount of power produced and supplied ( RS....per GWhr or MWhr) on monthly basis. Not on any other criteria.
2. PUCSL has nothing to do here. Power Purchase Agreement is between Producer and CEB.

This is because a few people just put pathetic turbines across a small catchment to produce electricity. They got nothing much by selling 1 MW but they got massive capital cost rebates by quoting ridiculous figures for building them............
I am somewhat skeptical about above reasoning also. the first thing in setting up of a power plant is a technical study , usually by an Electrical /Mechanical engineer. I can't think about an Engineer, recommending a over capacity turbine. Besides this technical study is reviewed by CEB (again Engineers ) and funding Banks (usually by an Engineer, Engineering Consultant).
Capital cost is also reviewed by the Bank . If CEB gives a rebate based on Capital cost, they would surely review the reasonability of capital cost. There can't be deliberate overestimates.
Capital cost in setting up, run of the river hydropower plant, is more or less standard. Those involved know turbine prices of the suppliers ( ostly of German ,Uk, Chinese origin). Can be verified ,compared easily. Construction cost may vary , max 10% depending of the difficulty of terrain. There is a priced BOQ, any one can assess cost computations. No producer can fool the parties involved (banks, CEB), as you suggest.

Have you noticed that the PAP stated capital (capital raised from the IPO + initial capital) is very close to the capital raised from the IPO -> initial capital outlay to set up PAP was not as high ;

I can't understand the relationship of this fact( even it is true), to the subject under discussion.

30PAP will take over by Hemas Power  - Page 2 Empty Re: PAP will take over by Hemas Power Sat Mar 16, 2013 3:05 pm

rainmaker


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
There is some maths involved in the tarriff calculation. Not all power producers get the same amount per mega watts.

The PUCSL (Public Utilities Commission of SL) is the boss not the CEB. The CEB also has a license to supply electricity (check the licensee list)

Anyway the document which relates the mini-hydro, wind, dendro etc tarriff calculation is here. The tarriff computation takes into account debt/equity, cashflows, return on equity, overheads and maintenance cost etc.

http://www.pucsl.gov.lk/english/wp-content/themes/pucsl/pdfs/NCRETariffs2012-2013_ConsultationDocument.pdf

The tarriff document this time around states that it applies for 20 years so you can get stuffed if you don't get it right the first time.

31PAP will take over by Hemas Power  - Page 2 Empty Re: PAP will take over by Hemas Power Sat Mar 16, 2013 7:01 pm

knockknobbler


Manager - Equity Analytics
Manager - Equity Analytics
@rainmaker wrote:There is some maths involved in the tarriff calculation. Not all power producers get the same amount per mega watts.

The PUCSL (Public Utilities Commission of SL) is the boss not the CEB. The CEB also has a license to supply electricity (check the licensee list)

Anyway the document which relates the mini-hydro, wind, dendro etc tarriff calculation is here. The tarriff computation takes into account debt/equity, cashflows, return on equity, overheads and maintenance cost etc.

http://www.pucsl.gov.lk/english/wp-content/themes/pucsl/pdfs/NCRETariffs2012-2013_ConsultationDocument.pdf

The tarriff document this time around states that it applies for 20 years so you can get stuffed if you don't get it right the first time.

Thanks for the link .
I , now realize the role of PUCSL in this matter.
However ,the statement in your previous post ......

This is because a few people just put pathetic turbines across a small catchment to produce electricity. They got nothing much by selling 1 MW but they got massive capital cost rebates by quoting ridiculous figures for building them..........

implies.... ,that the income /profit of the power producer is mainly related to capital cost ( massive rebate ...) compared to income from selling power output.
This will lead a prospective share investor to look for balance sheet / size of capital cost rather than plant capacity, plant factor, availability of water . etc, which determines the power output.
The PUCSL document clearly indicates ,there is no such " massive rebate " based on capital cost, and the payment to power producer is based entirely on the power produced in kWh , multiplied by the "decided rate". PUCSL has obtained proposals from power producers , CEB and has decided the rate taking into account capital cost (Rs 209 mn per MW ), WACC, loan interest ,operational cost, ROI. ,plant factor etc. They further say, the rate it applicable for current year upto 31 Dec 2013.
I hope this is clear now and share investors need not to worry about... , capital cost rebates. .
Highly appreciate your knowledge and continuous attention, enthusiasm on this subject.

32PAP will take over by Hemas Power  - Page 2 Empty Re: PAP will take over by Hemas Power Sat Mar 16, 2013 8:20 pm

Gaja


Associate Director - Equity Analytics
Associate Director - Equity Analytics
@rainmaker wrote:
@Gaja wrote:
@rainmaker wrote:
@stockboy wrote: HP WILL TAKE OVER PAP BY NEXT WEEK AT PRICE AROUND RS 3 AND 3.5.I HEARD THAT AGREEMENT HAS ALREADY SIGN . HEMAS WILL BUY AROUND 30% OF PAP AS FIRST STEP.

I don't think it will be at the above price. If it does occur I will not be surprised as the talks have been on for a long time.

However note that PAP was an extreme disappointment as the top shareholders and directors sold a lot at 8-9/=. Even Emagewise bought at 6/= and sold at 8-9/=.
Even the respected Deepal Sooriyaratchi sold his block at 8/=. Now the Berhad owns 23% with retailers owning 70+% of the stock. If a mandatory occurs, I doubt it will achieve anything given the holding loss of the current 70%. Shocked

---------------------------------------------------------------------

Closer look at Power:

I know most of you are big time speculators but I will tell you why this will occur at some point in time. You see SL has about 250 small power producers. The CEB brought out an agreement on Small Power Producers that makes the below 10MW ones run at losses. The above 10 MW can negotiate the terms of the contract.

PAP has the agreement till 2023 and hence you can't expect too much in the projections.

http://www.pucsl.gov.lk/english/wp-content/themes/pucsl/pdfs/Licensee-List.pdf



See the attachment above to see the entire list. Consolidation has to occur.



Yes Hemas is looking for the companies, but i don't think they will buy a company, unless they are certain they can take the control the management

I can't totally agree with this. PAP is a serious power producer. The Senok and the other ones are affiliated to some PEPs with connections to the top. They won't sell out.

The mistake the CEB was the national grid concept that meant that Country load must be taken on by everyone. What is better is regional load coming from regional power producers (like Jaffna during the wartime). The current system results in wastage as power from Moneragala is nothing when it comes to Colombo ---> power is lost in transmission

If am not mistaken Senok is now concentrating more in the Windpower right now

33PAP will take over by Hemas Power  - Page 2 Empty Re: PAP will take over by Hemas Power Sun Mar 17, 2013 7:09 am

rainmaker


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
The rebates existed in the past. It will no longer apply and the CEB's calculations will not make new small power plants work. Hence small plants have to consolidate to achieve 10MW capacity in order to negotiate.

34PAP will take over by Hemas Power  - Page 2 Empty Re: PAP will take over by Hemas Power Sun Mar 17, 2013 9:57 am

knockknobbler


Manager - Equity Analytics
Manager - Equity Analytics
@rainmaker wrote:The rebates existed in the past. It will no longer apply and the CEB's calculations will not make new small power plants work. Hence small plants have to consolidate to achieve 10MW capacity in order to negotiate.

I am afraid to mention, I can't agree with any of the above statements. I'll briefly indicate my reasons .

The rebates existed in the past. It will no longer apply..........
I can categorically say there was not a rebate scheme in the past, and payments to power producer were calculated and billed monthly based on the quantity of power produced in kWh (per month).

... CEB's calculations will not make new small power plants work
As per the list you have attached earlier , over 250 mini hydro plants are operating now (successfully !) and they have a Association also, and as to my knowledge, Association has not opposed to the present rate. As we know companies listed in CSE are operating profitably. I checked with a source, and he confirmed that if he can operate over 40% plant capacity, margin (before interest payment) is over 70%.

Hence small plants have to consolidate to achieve 10MW capacity in order to negotiate.
It seems there is a misconception here. These power plants cannot be consolidated purely based on capacity (as you do in in accounting ). If a producer own and operates 5 mini hydro plants of 2 MW capacity each ,at different locations, he can't consolidate that into a 10 MW plant for tariff negotiation purposes. PUCSL document clearly say , this tariff structure is applicable to any plant producing less than 10MW.
If a single plant has a capacity more than 10MW , then there is a different methodology ( negotiation?)for tariff computation. Even in this case (negotiation ), I can't think that power producer has a greater advantage , because he has no other option (but to sell to CEB). Though the methodology is not stated, the negotiated rate has to be transparent, and should be in line with other tariffs.

35PAP will take over by Hemas Power  - Page 2 Empty Re: PAP will take over by Hemas Power Sun Mar 17, 2013 10:27 am

rainmaker


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
So you think all these investors pumped billions of rupees to small 1MW-2MW power producers Wink What do you think the collective investment of those power producers was? Do you know that the billions are owed to these IPPs

What ever way you put it, the IIPs are heavily laden with debt and hence they have to cover interest and capital payments to banks like DFCC. The rebate can be explicit or implicit in the Tarriff calculation which results in the cost of the project being paid out.

What Chammpika of the JHU was trying to say is that why should we help pay off their loans? Fair call Wink

The two most successful power producers were the Jaffna ones which were run on diesel.

36PAP will take over by Hemas Power  - Page 2 Empty Re: PAP will take over by Hemas Power Sun Mar 17, 2013 1:42 pm

knockknobbler


Manager - Equity Analytics
Manager - Equity Analytics
@rainmaker wrote:So you think ......

So you think all these investors pumped billions of rupees to small 1MW-2MW power producers Wink What do you think the collective investment of those power producers was? Do you know that the billions are owed to these IPPs


It is not what I think .It is what has happened. Pl refer your attachment, listing power projects implemented upto 08/06/2012 .Out of 250(?) , only 14 are equal or above 10 MW. That means over 200 are less than 10MW. If you are interested you con count how much are exactly in the category of 1MW -2MW.
No idea about the collective investment. Agreed , there can be billions of debt. Also, understand they are servicing debt. So what's the point you are making ?

What ever way you put it, the IIPs are heavily laden with debt and hence they have to cover interest and capital payments to banks like DFCC. The rebate can be explicit or implicit in the Tarriff calculation which results in the cost of the project being paid out.


Pardon me to say this, I haven't put it this way or any other way.I merely responded to your assertions, which I find somewhat misleading.
Whatever the level of debt in each project , If the power generation and the tariff paid is enough to pay interest and capital of debt, and earn a return on their investment, what's issue you are raising ?
Again, I categorically say there is no explicit or implicit rebate on capital cost, and payments to power producer were calculated and billed monthly based on the quantity of power produced in kWh (per month). If you are still not sure , please read the PDF document of PUCSL,
"Decision on Non-Conventional Renewable Energy Purchase Tariffs 2012-2013 " again and again....... (and as you said there is some maths involved, pl consult someone if you are in doubt.)


What Chammpika of the JHU was trying to say is that why should we help pay off their loans? Fair call Wink

No idea, what they are saying. Again, what 's the point ?
Whatever their personal /political opinion ..that doesn't matter. This is a logical business transaction.
This is the logic.
.....CEB has to generate or purchase to power to meet increasing demand. If they are purchasing from private power producers ,it is advantageous for them to pay a rate less than their unit cost in generating additional power.
.....from the private power developers perspective , if the rate paid by CEB is enough to cover operating cost, interest payment (what ever the debt ) and enable them to earn an above average ROI , they will do it. As evidence suggests, they have done it.

I appreciate your concerns in this mini hydro projects,( that forced me also to study it again. some times back ,I had some involvements) .
Probably you are raising some genuine concerns . But I didn't get the point, Can you express more clearly and logically ?

37PAP will take over by Hemas Power  - Page 2 Empty Re: PAP will take over by Hemas Power Sun Mar 17, 2013 2:04 pm

rainmaker


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
@Knockknobbler

I think we both learnt something new here. I was always of the impression that some rebate was given. It appears the capital cost is repaid with a higher tarrif only and that pays the loan and interest.

I'm still not convinced on whether power stocks are value stocks. It's good for speculating given the high risk. Politically some threatened to not outsource power production.

Getting back to PAP the number retailers in this is high enough that collectively they can over throw the Board

38PAP will take over by Hemas Power  - Page 2 Empty Re: PAP will take over by Hemas Power Sun Mar 17, 2013 8:58 pm

knockknobbler


Manager - Equity Analytics
Manager - Equity Analytics
@rainmaker wrote:@Knockknobbler
...............
I'm still not convinced on whether power stocks are value stocks. It's good for speculating given the high risk. Politically some threatened to not outsource power production.

Getting back to PAP the number retailers in this is high enough that collectively they can over throw the Board
It's a valid issue....., worth looking at in detail.
With regard to business risk let's briefly compare the key factors that determine the business risk of any enterprise,

1. market demand/ price - whether market will absorb the supplied quantity at the given price level
2. product quality - whether quality is acceptable to the market to fulfill ......1 above.
3. production technology -whether technology in use is appropriate to meet..... 2 above and to accommodate future changes
4. labor productivity - whether the productivity level can be maintained, amidst changes in demand /supply of outside labor market.
5. purchase of raw materials/ utilities - whether prices and availability can be ensured .

With regard to business risk of operating a mini-hydro plant , the risks mentioned in 2,3,4 above are minimum or not applicable at all.
With regard to ....1. market demand / prices -, there is no question about demand. Already we discussed in detail about the pricing mechanism, and it is evident that the present price level, guarantees a reasonable ROI to the investor. The question is ,as you implied whether political decisions will affect the present arrangement? My opinion is ..NO... ,at least to existing mini hydro plants, due to following reasons .
# since demand is continuously increasing and CEB is struggling to meet the demand . it is not logical, economically or politically
# financially it is advantageous to CEB
# this has evolved to a mature industry sector , with over 250 units. It can be expected, that type of industry sector usually carry lobbying /political clout to safeguard their business/ financial interests.

The last issue price /availability of raw materials , in this case ..WATER , is the biggest impact. Though there is no issue in price , availability entirely depend on the rainfall in
the catchment area ,which no one can control .That factor is the only business risk ,affecting this industry.

P/s - I entirely forget that, even risk No. 5 .... YOU can look after. So, no risk at all.










u

39PAP will take over by Hemas Power  - Page 2 Empty Re: PAP will take over by Hemas Power Sun Mar 17, 2013 9:20 pm

keeper

keeper
Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
Tomorrow will be announce?

40PAP will take over by Hemas Power  - Page 2 Empty Re: PAP will take over by Hemas Power Mon Mar 18, 2013 9:59 am

sandunj


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
At the moment PAP is shining...

41PAP will take over by Hemas Power  - Page 2 Empty Re: PAP will take over by Hemas Power Mon Mar 18, 2013 10:06 am

keeper

keeper
Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
Stockboy, You are Good boy...PAP...PA...P

42PAP will take over by Hemas Power  - Page 2 Empty Re: PAP will take over by Hemas Power Mon Mar 18, 2013 11:01 pm

NZ BOY

NZ BOY
Moderator
Moderator
true dr tomorrow i will buy PAP @ 3 1 million shares

43PAP will take over by Hemas Power  - Page 2 Empty Re: PAP will take over by Hemas Power Tue Mar 19, 2013 2:18 am

ccsentha


Vice President - Equity Analytics
Vice President - Equity Analytics
no announcements??

44PAP will take over by Hemas Power  - Page 2 Empty Re: PAP will take over by Hemas Power Tue Mar 19, 2013 6:47 am

Slstock

Slstock
Director - Equity Analytics
Director - Equity Analytics
Why you buy at Rs 3, 1 million when yesterday it traded at Rs 2.8

Is this a promotion ?



@NZ BOY wrote:true dr tomorrow i will buy PAP @ 3 1 million shares

45PAP will take over by Hemas Power  - Page 2 Empty Re: PAP will take over by Hemas Power Tue Mar 19, 2013 7:32 am

stockboy


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics


be patient announcement will follow the trade. it will happen during this week.probably today

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