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FINANCIAL CHRONICLE™ » FINANCIAL CHRONICLE™ » VPEL Quarter Gross Profits Up 86%

VPEL Quarter Gross Profits Up 86%

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1VPEL Quarter Gross Profits Up 86% Empty VPEL Quarter Gross Profits Up 86% Tue Nov 12, 2013 9:50 am

lasithfernando


Stock Trader
Vallibel Power Erathna seems to have done incredible well over the last quarter.

Gross profit increase of 86% (Rs. 181,392,465 to Rs. 337,391,187) and net profit increase of 141% (Rs. 112,594,497 to Rs. 271,747,496) and an EPS increase of 127% (Rs. 0.15 - Rs. .34)

Do you guys think power generation companies like Vallibel make good long term investments? Or will they be more medium term investments with alternate energy sources being developed?

Source - CSE.lk

2VPEL Quarter Gross Profits Up 86% Empty Re: VPEL Quarter Gross Profits Up 86% Tue Nov 12, 2013 12:13 pm

Hawk Eye

Hawk Eye
Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
June'13 Qtr -0.32, Sep'13 Qtr -0.34. All the hydro powers will end the year with massive profits. Almost 100% increase in value

I am holding considerable amounts of VPEL & PAP in my portfolio

3VPEL Quarter Gross Profits Up 86% Empty Re: VPEL Quarter Gross Profits Up 86% Tue Nov 12, 2013 12:20 pm

Kithsiri

Kithsiri
Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
@Hawk Eye wrote:June'13 Qtr -0.32, Sep'13 Qtr -0.34. All the hydro powers will end the year with massive profits. Almost 100% increase in value
If so, why PAP is stagnant ?

4VPEL Quarter Gross Profits Up 86% Empty Re: VPEL Quarter Gross Profits Up 86% Tue Nov 12, 2013 12:48 pm

Hawk Eye

Hawk Eye
Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
@Kithsiri wrote:
@Hawk Eye wrote:June'13 Qtr -0.32, Sep'13 Qtr -0.34. All the hydro powers will end the year with massive profits. Almost 100% increase in value
If so, why PAP is stagnant ?
Who knows ? Patience is the only strategy for me

5VPEL Quarter Gross Profits Up 86% Empty Re: VPEL Quarter Gross Profits Up 86% Tue Nov 12, 2013 1:15 pm

knockknobbler


Manager - Equity Analytics
Manager - Equity Analytics
@lasithfernando wrote:
Do you guys think power generation companies like Vallibel make good long term investments? Or will they be more medium term investments with alternate energy sources being developed?
Source - CSE.lk
Even though alternate energy sources are being developed, hydro power generation will be there, because
1.  it is the cheapest in cost,
2. renewable energy,  
3. no environment pollution at all, compared to other (except wind power )

However, the  profitability of hydro power generation companies , is dependent on few critical factors .

1. There is only one Buyer, CEB. Seller has no other option ,so no leverage in negotiating the selling price.  Producer has to sell @ the price decided solely by CEB ( or....  that Utility  Commission). So the decision is subjected to bureaucratic and political  considerations as well.  This is the most critical factor affecting profitability.

2. Rainfall pattern in the geographical location of the plant is he next important factor.
However, normally Engineers  assess this risk factor, at the time of setting up of the plant , based on rainfall pattern during last 20- 30 years.

3. Reputation of plant supplier and condition of the plant
There are various types of power plants based on country of origin , German, English, Chinese ,Taiwanese, Indian... etc.  Definitely, the plant performance first two origins  are much better compared to others and the operational/ maintenance cost would be minimum. . However the capital cost (and the debt ) is high. So, its a trade-off.

4. Reputation /Integrity of major shareholder / managing agent - This is also a factor to be considered. Since there are various ways money can be siphoned out, or diversified into high risk investments , by  major shareholder / managing agent ,leaving less cash to be distributed as dividends.  Consider the examples in Plantation companies.

So, a prospective Investor has to gather information on above critical factors  ,analyze,  compare and make his forecasts /decisions  accordingly.

6VPEL Quarter Gross Profits Up 86% Empty Re: VPEL Quarter Gross Profits Up 86% Tue Nov 12, 2013 1:37 pm

Backstage

Backstage
Moderator
Moderator
@knockknobbler wrote:
@lasithfernando wrote:
Do you guys think power generation companies like Vallibel make good long term investments? Or will they be more medium term investments with alternate energy sources being developed?
Source - CSE.lk
Even though alternate energy sources are being developed, hydro power generation will be there, because
1.  it is the cheapest in cost,
2. renewable energy,  
3. no environment pollution at all, compared to other (except wind power )

However, the  profitability of hydro power generation companies , is dependent on few critical factors .

1. There is only one Buyer, CEB. Seller has no other option ,so no leverage in negotiating the selling price.  Producer has to sell @ the price decided solely by CEB ( or....  that Utility  Commission). So the decision is subjected to bureaucratic and political  considerations as well.  This is the most critical factor affecting profitability.

2. Rainfall pattern in the geographical location of the plant is he next important factor.
However, normally Engineers  assess this risk factor, at the time of setting up of the plant , based on rainfall pattern during last 20- 30 years.

3. Reputation of plant supplier and condition of the plant
There are various types of power plants based on country of origin , German, English, Chinese ,Taiwanese, Indian... etc.  Definitely, the plant performance first two origins  are much better compared to others and the operational/ maintenance cost would be minimum. . However the capital cost (and the debt ) is high. So, its a trade-off.

4. Reputation /Integrity of major shareholder / managing agent - This is also a factor to be considered. Since there are various ways money can be siphoned out, or diversified into high risk investments , by  major shareholder / managing agent ,leaving less cash to be distributed as dividends.  Consider the examples in Plantation companies.

So, a prospective Investor has to gather information on above critical factors  ,analyze,  compare and make his forecasts /decisions  accordingly.
I would also like to add that apart from the rainfall patterns , there are also the issues of water retention capacities , protection of upper watershed catchment zones, erosion of embankments and reservoir maintenance (de silting ect).

I also noticed that the Ugandan projects have not given the details regarding the power purchase agreements. (with regard to VLL and HPWR)

7VPEL Quarter Gross Profits Up 86% Empty Re: VPEL Quarter Gross Profits Up 86% Tue Nov 12, 2013 1:56 pm

seek


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
@knockknobbler wrote:
@lasithfernando wrote:
Do you guys think power generation companies like Vallibel make good long term investments? Or will they be more medium term investments with alternate energy sources being developed?
Source - CSE.lk
Even though alternate energy sources are being developed, hydro power generation will be there, because
1.  it is the cheapest in cost,
2. renewable energy,  
3. no environment pollution at all, compared to other (except wind power )

However, the  profitability of hydro power generation companies , is dependent on few critical factors .

1. There is only one Buyer, CEB. Seller has no other option ,so no leverage in negotiating the selling price.  Producer has to sell @ the price decided solely by CEB ( or....  that Utility  Commission). So the decision is subjected to bureaucratic and political  considerations as well.  This is the most critical factor affecting profitability.

2. Rainfall pattern in the geographical location of the plant is he next important factor.
However, normally Engineers  assess this risk factor, at the time of setting up of the plant , based on rainfall pattern during last 20- 30 years.

3. Reputation of plant supplier and condition of the plant
There are various types of power plants based on country of origin , German, English, Chinese ,Taiwanese, Indian... etc.  Definitely, the plant performance first two origins  are much better compared to others and the operational/ maintenance cost would be minimum. . However the capital cost (and the debt ) is high. So, its a trade-off.

4. Reputation /Integrity of major shareholder / managing agent - This is also a factor to be considered. Since there are various ways money can be siphoned out, or diversified into high risk investments , by  major shareholder / managing agent ,leaving less cash to be distributed as dividends.  Consider the examples in Plantation companies.

So, a prospective Investor has to gather information on above critical factors  ,analyze,  compare and make his forecasts /decisions  accordingly.
Good input. Thanks.

Let me come to the reality.

Have you invested in a hydro-power company? If so, what is your best pick according to aforementioned criteria?

8VPEL Quarter Gross Profits Up 86% Empty Re: VPEL Quarter Gross Profits Up 86% Tue Nov 12, 2013 2:54 pm

realstock


Senior Equity Analytic
Senior Equity Analytic
Supper profit VPER

9VPEL Quarter Gross Profits Up 86% Empty Re: VPEL Quarter Gross Profits Up 86% Tue Nov 12, 2013 3:33 pm

nirowat


Manager - Equity Analytics
Manager - Equity Analytics
cannot understand why VPEL has moved up. was Following closley today and was surprised that some even sold at 5.90 !

I agree with the above points, hydro power has its risks but this year most are mitigated, hence at least in the short to medium term these should run.

VPEL divident history is good. Best selected area of rain fall, with current very wet year. Not sure how long the CEB purchase agreement is valid till but there is one in place at present.

10VPEL Quarter Gross Profits Up 86% Empty Re: VPEL Quarter Gross Profits Up 86% Tue Nov 12, 2013 3:43 pm

nirowat


Manager - Equity Analytics
Manager - Equity Analytics
Power purchase agreement is valid for 15 years from 2004, hence till end of 2019, plenty of time to go

11VPEL Quarter Gross Profits Up 86% Empty Re: VPEL Quarter Gross Profits Up 86% Wed Nov 13, 2013 12:26 am

knockknobbler


Manager - Equity Analytics
Manager - Equity Analytics
@seek wrote:
Good input. Thanks.
Let me come to the reality.
Have you invested in a hydro-power company? If so, what is your best pick according to aforementioned criteria?
Good question ! ( though, You have put me in a difficult  position)

Have you invested in a hydro-power company?
Yes, have some shares , (But not really I have invested).
Actually , that's a private company , and that was a friendly offer to appreciate some work I did for them, during the initial stages.
With regard to listed companies , I have few shares just to gather company  information /accounts.

what is your best pick according to aforementioned criteria?
Actually,I have not done a comparative study based on above criteria , because.... ..

# with regard to criteria 1, PPA terms are not  available in company  published documents. Terms of PPA and rates are not same for all companies.  These have been revised from time to time, by CEB / Utility Commission. But if someone knows the exact time ( period) of the  PPA , the rates and terms applicable to that particular project can be ascertained. This needs some investigation.

#Criteria no. 3- information regarding to the plant, also has to be sourced from outside. But someone need not to engage in spying, because normally these  are "public information"  among developers  in the same geographical area,

# I am reluctant to  pay attention to hydro shares , specially  because of  criteria no 4.  As to my knowledge ( I may be wrong ?), the major shareholders involved in all quoted hydro companies , are not the original  developers.  They came into the scene much later, only as an investment. Most  are involved in  other "big businesses ",  and naturally their interest may not align with that of minor shareholders.

It seems most investors are going after these shares based on rainfall factor. That's also logical.
Sorry, that I disappointed you (what is the best pick ? ), nevertheless I am glad  to here your views on the last point about major shareholders.  

Sometimes back there was an interesting ( and aggressive ?) discussion in this forum , on  tariff rates, PPA, and  the role of Utility Commission. I found the link.....

http://forum.srilankaequity.com/t26639-pap-will-take-over-by-hemas-power

12VPEL Quarter Gross Profits Up 86% Empty Re: VPEL Quarter Gross Profits Up 86% Wed Nov 13, 2013 12:49 am

knockknobbler


Manager - Equity Analytics
Manager - Equity Analytics
@Backstage wrote:
@knockknobbler wrote:



So, a prospective Investor has to gather information on above critical factors  ,analyze,  compare and make his forecasts /decisions  accordingly.
I would also like to add that apart from the rainfall patterns , there are also the issues of water retention capacities , protection of upper watershed catchment zones, erosion of embankments and reservoir maintenance (de silting ect).

I also noticed that the Ugandan projects have not given the details regarding the power purchase agreements. (with regard to VLL and HPWR)
You have added some valid points.
Appreciate your input.

13VPEL Quarter Gross Profits Up 86% Empty Re: VPEL Quarter Gross Profits Up 86% Wed Nov 13, 2013 6:54 am

Chinwi

Chinwi
Associate Director - Equity Analytics
Associate Director - Equity Analytics
@ knockknobbler,
Thank you for your good work.

water retention capacities , protection of upper watershed catchment zones, erosion of embankments and reservoir maintenance (de silting ect).
Retention capacities and reservoir maintenance are not much relevant to our studies in listed HPPs because all (*except one ) are weir diversions. ( no reservoirs to collect water and release in controlled manner )

*- One VPEL HPP gets used water released from a CEB turbine in a reservoir system


@knockknobbler wrote:# I am reluctant to pay attention to hydro shares , specially because of criteria no 4. As to my knowledge ( I may be wrong ?), the major shareholders involved in all quoted hydro companies , are not the original developers. They came into the scene much later, only as an investment. Most are involved in other "big businesses ", and naturally their interest may not align with that of minor shareholders.


At initial stages they acquired others work. Now most of them are building own plants.
I think if they are investors then they will pay more dividends and minor shareholders should also get benefited. I may be wrong.

VPEL NAV is still very low because they have paid dividends than paying back the loans. In contrast, HPFL has maintained almost zero debt . (until recent 80m loan from Sampath bank to built a new HPP.)

14VPEL Quarter Gross Profits Up 86% Empty Re: VPEL Quarter Gross Profits Up 86% Wed Nov 13, 2013 8:10 am

smallville

smallville
Associate Director - Equity Analytics
Associate Director - Equity Analytics
How, if Govt decides, to open a Solar farm?

True the initial cost is high but how about the long sustainability?
Found few links related to this also;

http://www.sundayobserver.lk/2011/08/14/fea10.asp

Further, it states in wiki, the Buruthakanda Solar Park will be the first and only commercial-scale solar power station in Sri Lanka.
Upon completion in late 2012, the entire 1,237 KW facility is expected to produce up to 1.7 GWh of energy annually, 1 GWh from the first stage, and 0.7 GWh from the second stage.

15VPEL Quarter Gross Profits Up 86% Empty Re: VPEL Quarter Gross Profits Up 86% Wed Nov 13, 2013 9:29 am

Chinwi

Chinwi
Associate Director - Equity Analytics
Associate Director - Equity Analytics
Many people tried to start Solar Farms.
Incapable engineers or bureaucrats or somebody in CEB blocked them all the time.
They always say the grid can't cope with new supply... bla bla
But they never chase away the fuel burning people.

16VPEL Quarter Gross Profits Up 86% Empty Re: VPEL Quarter Gross Profits Up 86% Wed Nov 13, 2013 3:37 pm

WWDNF


Equity Analytic
Equity Analytic
Absolutely right sir!!! I have submitted a proposal for a 10Mw plant which is fully funded by my principals but the proposal is still gathering dust somewhere for almost a year.

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