WindForce

WIND – Rs.21.4

Deshan Hettiwatte
[email protected]
WIND: Leading Sri Lanka’s Renewable
+94 76 8272 508 Energy Surge with High-Growth Potential
WindForce (WIND) is the largest and most diversified renewable energy company in Sri Lanka
(SL), operating twelve solar, eight wind and ten mini-hydro powerplants with a total installed
capacity of over 242.8 MW and an effective capacity of 145.4 MW. While 59% of WIND’s
capacity is located in SL, WIND is also present in Pakistan, Uganda and Ukraine.
Undertaking large scale renewable energy projects
As a leading player in the renewable energy industry in SL, WIND plans to commission 250 MW
1 November 2024 of wind and solar projects in SL and overseas over the next five years. WIND recently began 110
MW of solar power projects in SL, set to be completed in 2H2025E and 1H2026E. Additionally,
Sri Lanka
19 September 2023
WIND has secured the bid for a 50 MW wind power plant in Mannar, SL at the lowest tariff rate
Independent Power and an EPC project for a client in Maldives. However, WIND has exited the rooftop solar
business, disposing fixed assets of Project Hirujanani (2.1 MW) in full and 10.2 MW of Project
Producers & Energy Suryadhanavi (11.4 MW) in SL, to focus large-scale renewable energy projects.
Traders
Recovery of overdue receipts to propel growth
Outstanding arrears owed to WIND by Ceylon Electricity Board (CEB) have been paid in full,
BUY following the improved financial position of the state entity. This will enable WIND to accelerate
the implementation of proposed power projects in the pipeline, enhance its capacity to meet
12M N: Price Target – Rs.25.0 short-term obligations, sustain ongoing operations, and bolster overall financial health in the near
term.
±% Total Potential – +17.0
WIND’s leadership in Sri Lanka’s renewable energy revolution
With energy demand expected to rise, the Government of SL is likely to follow CEB’s Base Case
Plan (LTGEP 2023E–2042E), which outlines capacity requirements for the next two decades and
emphasizes wind and solar power. This positions WIND, as the current industry leader, to capture
significant growth by leveraging its expertise in these segments.
Mkt Cap - US$ mn 98.4 Monsoon boosts Sri Lanka’s hydroelectric and wind power generation
1,350.8
Persistent rains over the past three months (3Q2024) and expected monsoon conditions, along
Sh. in Issue – mn.
with favorable wind patterns, are set to boost WIND's hydro and wind operations. Additionally,
3M Av. Daily Vol. 730,699 the strategically established solar power plants and new installations in high solar irradiation areas
3M ADT - US$ 10,302 signal growth in both the topline and bottom-line.

12M H / L – Rs. 21.6/18.0 Outlook and Valuations

FY25E and FY26E net profit forecasts have revised down by -8% to Rs.1,893mn (+22% YoY) and
-4% to Rs.2,221mn (+17% YoY), respectively. The downward revisions were mainly resulted due
to the recent disposal of Project Hirujanani (total 2.1MW) and Project Suryadhanavi (10.2 MW
out of 11.4 MW). Based on our forecasts, WIND share trades at forward PER multiples of 15.3X
for FY25E and 13.0X for FY26E whilst offering a ROE between 8% - 9.5% for the same periods.
Stock Performance - % Based on a SOTP valuation, we have revised down our 12M target price by -1% to Rs.25.0 (with
dividend) which indicates a ~17% upside potential to current price levels and maintain our rating
1M 3M 12M
as a BUY.
Absolute 6.5 7.5 17.6
Relative -1.3 -3.4 -1.9 Year to 31 March FY21 FY22 FY23 FY24 FY25E FY26E
Revenue – Rs. mn 4,310 4,367 4,953 5,852 6,659 7,397
WIND - N ASPI Indexed to WIND
Net Profit – Rs. mn 1,750 1,575 1,480 1,550 1,893 2,221
23 Earnings per Share – Rs. 1.5 1.2 1.1 1.2 1.4 1.6
Earnings per Share Growth - % 18.5 -23.3 -5.7 4.5 21.8 17.4
21
Price / Earnings Ratio – X 11.8 13.6 15.0 17.0 15.3 13.0
20 Gross Dividend per Share – Rs. 0.4 1.3 - 1.0 1.1 1.4

18 Gross Dividend Yield - % 2.0 8.2 - 5.1 5.3 6.3

Net Book Value per Share – Rs. 15.4 15.3 16.9 17.0 17.3 17.6
17
Price / Book Value – X 1.2 1.0 1.0 1.2 1.2 1.2
15 Return on Equity - % 9.9 7.6 6.7 7.0 8.1 9.4
Market Price per Share – Rs. 17.9 15.9 16.5 19.6 21.4 21.4
No. of Shares - mn 1,148 1,351 1,351 1,351 1,351 1,351

Source: CSE Source: WIND financials & CT CLSA

Note: Valuations are based on recurring EPS, Adj. for Capital Issues (if any); Historic Ratios are based on Y/E MPS

CT CLSA SECURITIES (PVT) LIMITED | A Member of the Colombo Stock Exchange 1

 WindForce

Net Profit - Rs. mn & Net Profit The Business

Margin - %
Net Profit (Rs. bn)
WindForce (WIND) is the largest and most diversified renewable energy company in Sri Lanka
NP Margin (%) - RHS
(SL), operating twelve solar, eight wind and ten mini-hydro powerplants with a total installed
1.1 60 capacity of over 242.8 MW and an effective capacity of 145.4 MW .
While 59% of WIND’s capacity is located in SL, WIND is also present in Pakistan, Uganda and
0.8 40
Ukraine. The group is currently in the process of constructing new solar power plants in
Vavunathivu, Batticaloa (10 MW) and Siyambalanduwa (100 MW) which is due to be
0.4 20
completed during 2H2025E and 1H2026E, respectively.

0.0 0 Recent Financial Performance

-0.4 -20 ❑ WIND recorded a 1Q25 net profit of Rs.471mn (>+100% QoQ; +4% YoY), in line with our
expectations.
-0.8 -40 ❑ However, after adjusting for the one-off income received from CEB, recognized as a late
payment worth Rs.634mn, and Goodwill impairment, WIND reported an adjusted net profit
of Rs.432mn for 1Q25 (vs. -Rs.63mn net loss in 4Q24 and a net profit of Rs.453mn in
Source: WIND financials 1Q24; >+100% QoQ and -5% YoY).
❑ Furthermore, an adjusted EPS of Rs. 0.32 for 1Q25 (vs. -Rs.0.05 for 4Q24 and Rs.0.34 for
1Q24) was reported (>+100% QoQ and -5% YoY).
❑ QoQ growth was primarily driven by a strong topline performance, boosted by the late
payment revenue of Rs.634mn received from the CEB. This was further supported by a
-37% QoQ reduction in net finance costs for the period.
❑ The YoY increase in earnings was underpinned by topline improvements, of the CEB late
payment revenue and an -8% YoY reduction in net finance costs..

Key Figures & Ratios 1Q24 4Q24 1Q25 % YoY % QoQ FY23 FY24 %YoY

Revenue - (Rs. mn) 1,226 1,231 1,567 27.8 27.4 4,953 5,852 18.1

Gross Profit - (Rs. mn) 695 1,153 1,468 >+100.0 27.3 3,001 3,865 28.8

Adjusted Gross Profit - (Rs. mn) 695 488 834 19.9 70.7 3,001 3,200 6.6

EBIT - (Rs. mn) 508 836 809 59.4 -3.2 2,259 2,856 26.4

Adjusted EBIT - (Rs. mn) 508 172 565 11.3 >+100.0 2,259 2,191 -3.0

Net Profit - (Rs. mn) 453 11 471 4.0 >+100.0 1,480 1,550 4.7

Adjusted Net Profit - (Rs. mn) 453 -63 432 -4.6 >+100.0 1,480 1,476 -0.3

Earnings per Share (Rs.) 0.34 0.01 0.35 4.0 >+100.0 1.1 1.2 4.7

Adjusted Earnings per Share (Rs.) 0.34 -0.05 0.32 -4.6 >+100.0 1.1 1.1 -0.3

GP Margin - (%) 56.7 39.7 53.2 -3.5 13.5 60.6 54.7 -5.9

EBIT Margin - (%) 41.4 14.0 36.1 -5.3 22.1 45.6 37.4 -8.1

NP Margin - (%) 36.9 -5.1 27.6 -9.4 32.7 29.9 25.2 -4.7

Effective Tax Rate - (%) 9.0 88.6 35.0 26.1 -53.6 13.6 31.5 17.9

Net Debt/(Cash) - (Rs. mn) 7,637 6,166 5,360 -29.8 -13.1 8,021 6,166 -23.1

Net Debt/(Cash) : Equity - (%) 32.8 26.8 22.8 -10.0 -4.0 35.2 26.8 -8.4

Source: WIND financials

Note: Valuations and ratios on a recurring basis; Adjusted for capital issues (if any), ^ as at end period

A CT HOLDINGS GROUP AND CLSA GROUP COMPANY 2

 WindForce

GP and EBIT Profit Margins - % ❑ WIND’s core revenue increased by +28% YoY and +27% QoQ to Rs.1,567mn in 1Q25. The
overall growth was driven by Wind and Hydro power segment operations coupled with
GP Margin (%) successful integration of the Hiruras Wind power plant in 2H2023.
EBIT Margin (%)
75 o Wind segment - The Wind segment revenue increased by +37% YoY, mainly due
to the addition of the Hiruras wind plant in June-July 2023. However, other wind
60 plants experienced a decline in electricity revenue due to delays in the wind
patterns entering the country coupled with reported breakdowns and failures
45 during the period.

30
o Solar segment - The Solar segment recorded a -6% YoY decline in revenue,
primarily due to the Tororo Ugandan plants power generation drop during the
15 quarter (-9% YoY), which was due to lower irradiation compared to the same
quarter in previous year.
0
o Hydro segment – Revenue generated from the Hydro segment increased by +67%
YoY, driven primarily by the addition of Rs.74mn in revenue from project
Mahoma’s, now a subsidiary, following management acquisition of larger stake in
the project. In addition, HPD, Energy Reclamation, and Melanka outperformed
Source: WIND financials
expectations, with respective growths of +31% YoY, +27% YoY, and +19% YoY,
owing to higher rainfall in catchment areas.
o Automobile segment - In terms of WIND’s automobile segment operations,
revenue for the quarter increased by >+100% YoY and +71% QoQ to Rs.18mn
Earnings per Share – Rs. due to an increase in sales conversions.
❑ In terms of reported margins for the quarter, GP margins increased to 53% in 1Q25 (vs. 40%
EPS (Rs.)
0.8 in 4Q24 and 57% in 1Q24). The increase in margins was primarily driven by the improved
topline for the quarter.
o However, direct cost elements associated with the WIND’s operations have
0.6
increased by +38% YoY due to expanded power plant operations (though declined
by -1% QoQ).
0.4 ❑ Overall, WIND recorded an adjusted EBIT of Rs.565mn for 1Q25 (>+100% QoQ and +11%
YoY). The reported improvement was mainly driven by increased topline coupled with
improved gross profit positions. Consequently, EBIT margins reported at 36% in 1Q25 (vs.
0.2
14% in 4Q24 and 41% in 1Q24).
o WIND’s administration costs reported for the period have been increased by
0.0 +36% YoY (though declined by -19% QoQ).
❑ The company’s finance costs were reported at Rs.222mn, reflecting a decrease of -32% YoY
and -8% QoQ. The reduction in market interest rates positively impacted the bottom line,
Source: WIND financials significantly lowering the company's substantial finance cost component
o Company's reported finance income has declined by -51% YoY, although up
>+100% QoQ to Rs.96mn.
Net Finance Cost – Rs. mn ❑ Overall, WIND recorded a net debt position of Rs.5,360mn as at 30 June 2024 (vs.
Rs.6,166mn as at 31 March 2024 and Rs.7,637mn as at 30 June 2023).
Net Finance Cost – Rs. mn
QoQ Growth (%) - RHS ❑ WIND’s Share of results of equity accounted investee increased by >+100% QoQ and +61%
300 90% YoY to Rs.331mn driven by enhanced performance on these investments.
❑ An Income tax expense of Rs.221mn and a Dividend tax of Rs.130mn was recorded for
240 60% 1Q25 (vs. an income tax expense of Rs.123mn and a Dividend tax of Rs.421mn for 4Q24
and an income tax expense of Rs.51mn for 1Q24).
180 30%
❑ WIND’s Trade and other receivables stood at Rs.2.4bn as of 30 June 2024 (compared to
120 0% Rs.2.5bn as of 31 March 2024 and Rs.4.8bn as of 30 June 2023). The YoY reduction in
receivables from the CEB was mainly driven by improved payment settlements from the
60 -30% utility. QoQ, the receivables position has returned to normalized levels.
o CEB settled all outstanding payments to WIND, including late payments totaling
0 -60%
Rs.664mn and Rs.634mn as at 31 March 2024 and 30 June 2024, respectively.
These amounts were reported in the published financial statements for 4Q24 and
1Q25 (following the revenue line item).
Source: WIND financials

A CT HOLDINGS GROUP AND CLSA GROUP COMPANY 3

 WindForce

Earnings Outlook
Year to 31 March FY21 FY22 FY23 FY24 FY25E FY26E

Revenue – Rs. mn 4,310 4,367 4,953 5,852 6,659 7,397

Net Profit – Rs. mn 1,750 1,575 1,480 1,550 1,893 2,221

Earnings per Share – Rs. 1.5 1.2 1.1 1.15 1.4 1.6

Earnings per Share Growth - % 18.5 -23.3 -5.7 4.5 21.8 17.4

Price / Earnings Ratio – X 11.8 13.6 15.0 17.0 15.3 13.0

Gross Dividend per Share – Rs. 0.4 1.3 - 1.0 1.1 1.4

Gross Dividend Yield - % 2.0 8.2 - 5.1 5.3 6.3

Net Book Value per Share – Rs. 15.4 15.3 16.9 17.0 17.3 17.6

Price / Book Value – X 1.2 1.0 1.0 1.2 1.2 1.2

Return on Equity - % 9.9 7.6 6.7 7.0 8.1 9.4

Market Price per Share – Rs. 17.9 15.9 16.5 19.6 21.4 21.4

No. of Shares - mn 1,148 1,351 1,351 1,351 1,351 1,351

Note: Valuations and ratios on a recurring basis; Adjusted for capital issues (if any)
Source: WIND financials and CT CLSA

Revenue – Main Segmental Contribution (FY22 – FY26E)

Segment FY22 FY23 FY24 FY25E FY26E

Wind Power Segment – Rs. mn 2,449 2,481 3,036 3,543 3,598

Solar Power Segment – Rs. mn 1,286 1,639 1,681 1,791 2,135

Hydro Power Segment – Rs. mn 554 562 705 749 758

Electrical Vehicles Segment – Rs. mn - 22 197 278 583

Management fees - Rs. mn 36 47 44 57 63

Operation & Maintenance fees - Rs. mn 42 64 93 72 77

Carbon credit income - Rs. mn - 83 - 93 100

Holding and Other Elimination - Rs. mn - 57 95 77 69

Total Revenue – Rs. mn 4367 4,953 5,852 6,659 7,383

Source: WIND financials and CT CLSA

A CT HOLDINGS GROUP AND CLSA GROUP COMPANY 4

 WindForce

Strong project pipeline to drive WIND’s footprint

❑ WIND, being a front runner in the renewable energy industry in SL, is expected to benefit
from its strong and diversified project portfolio and targets a total installed capacity of 500
MW by 2027E.
❑ The group’s diversified project pipeline includes over 250 MW worth wind and solar
projects awaiting to be commissioned in SL and overseas over the next five years.
o Currently, WIND is in the process of commissioning 110 MW of solar power
plants in SL. This includes a 10 MW solar power project which is expected to be
commissioned by 2H2025E and 100 MW slated for commissioning starting in
1H2026E.
o Recently, WIND has bid for another 50 MW wind power plant in Mannar, where
the company was identified as the bidder with the lowest tariff rate.

Completion Installed Capacity

Country Project Name Segment No. of Plants
Year (MW)
Vavunathivu II Solar Power
Sri Lanka 2H2025E Solar 10 1
Project

Sri Lanka 1H2026E Siyambalanduwa Solar PV Park Solar 100 1

Total 110 2

Source: CSE

❑ The commissioning of the aforementioned two power projects will elevate WIND’s installed
capacity to 353 MW by the end 2026E, with the majority of the increase driven by the
expansion of its solar segment.
❑ However, a deficit of 147 MW is anticipated to persist, which the company aims to address
before the conclusion of 2027E.

WIND’s Installed Capacity and Capacity Expansion Plan

600

500

400

300

200

100

0
2020 2022 2023 2024E 2025E 2026E Current Deficit Target
capacity + Capacity
WIND Solar Hydro Deficit pipeline

Source: Company Annual Report, CSE

❖ Recent project initiations -

Description FY25E FY26E
1. Project Hiruras –
Revenue (Rs. mn) 6,659 7,383 ▪ In 2H2023, WIND commissioned a 15 MW (10 MW + 5 MW) of wind power plants in
Revenue expected Mannar, SL (for more information refer CT CLSA WIND 2Q24 report).
from Project Hiruras 1,084 1,139 ▪ Following the successful commissioning of the Hiruras project, we expect substantial
(Rs. mn)
contribution to the company’s earnings in FY25E and FY26E. Additionally, the 15 MW wind
Source: CT CLSA power project is expected to account for ~15% - 16% of the group’s revenue in FY25E and
FY26E.

A CT HOLDINGS GROUP AND CLSA GROUP COMPANY 5

 WindForce

❖ Recent project initiations – Cont…

Description FY25E
2. EPC project for a 3rd party off-grid solar power project
▪ On 6 November 2023, WIND entered into an Engineering Design, Procurement,
Revenue (Rs. mn) 6,659 Installation, Testing, and Commissioning (EPC) Contract for a 389 kWp Ground Mount
Revenue expected from Off-Grid solar power project on Bawe Island, in Zanzibar, Tanzania.
Off – Grid Solar Project 13 ▪ WIND is managing the project for its client, Bawe Retreat Limited, which is developing a
(Rs. mn)
luxury resort with 70 rooms on Bawe Island and the agreement was officially signed on 6
Source: CT CLSA November 2023.
▪ Under this comprehensive contract, WIND has overseen the entire project lifecycle—from
engineering design and procurement of components to installation, testing, and final
commissioning of the solar power system.
▪ The overall project cost, covering engineering, procurement, and commissioning (EPC),
totaled to US$292,588.
▪ On 22 July 2024, WIND announced the successful commissioning of the project,
respectively
3. Project Kebithigollewa (10 MW) – Solar Power Project
▪ In July 2023, WIND disclosed its intent to acquire 88.5% equity stake in Kebithigollewa
Description FY25E FY26E Solar Power (Pvt.) Ltd., which is developing a 10 MW solar power plant in Kebithigollewa,
located in the Anuradhapura district.
Revenue (Rs. mn) 6,659 7,383
▪ The project initially estimated an investment cost of around Rs.2.7bn with an Equity
Revenue expected
Internal Rate of Return (EIRR) exceeding 15%. However, improved macroeconomic
from Project
Kebithigollewa
506 680 conditions in Sri Lanka and lower market prices for solar equipment reduced the
(Rs. mn) investment cost to Rs.1.9bn.
Source: CT CLSA ▪ Overall, the project maintained a Debt-to-Equity ratio of 70:30 and utilized Rs. 427mn
from its IPO proceeds, originally earmarked for "Other Projects" in the company’s IPO
prospectus, with the remainder funded from retained earnings.
▪ The project was successfully completed on 07 August 2024, and commissioned its power
generation operations accordingly on the same day.
▪ Upon commissioning the project, we anticipate the revenue generated from the power
plant operations to improve WIND’s profitability substantially. The 10MW power plant is
projected to contribute between 8% and 9% of the group’s revenue in FY25E and FY26E.

❖ New Project Developments

1. Recognition of Mahoma Uganda Ltd. as a subsidiary from 1 January 2024
▪ WIND owned 36% effective holding in Mahoma Uganda Limited, which was commissioned
Description FY25E FY26E in October of 2018, and is located in Mahoma, Uganda.

Revenue (Rs. mn) 6,659 7,383 ▪ Overall, the plant operates a total capacity of 2.7 MW and generates an estimated annual
average of 9.9GWh of energy. In addition, the plant also contributes in saving 7,000 MT,
Revenue CO2 emissions of annually.
contribution from
177 186
Project Mahoma ▪ The 2.7 MW project is expected to contribute between 2% and 3% of the group’s revenue
(Rs. mn) in FY25E and FY26E.
Source: CT CLSA
▪ However, WIND announced that from 1 January 2024 onwards, Mahoma Uganda Ltd. will
be recognized as a subsidiary which will further bolster company’s topline and bottom-line.
2. Asset Disposal and Strategic Focus Shift – Project Suryadhanavi & Project Hirujanani
▪ On 24 September 2024, WIND announced the completion of partial disposal of the fixed
assets of subsidiary Suryadhanavi (Pvt.) Ltd. and full disposal of the fixed assets of
subsidiary Hirujanani (Pvt.) Ltd.
▪ The decision was focused on exiting the rooftop solar business and focus on larger-scale
renewable energy projects.

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 WindForce

❖ New Developments – Cont.

▪ Overall, the Suryadhanavi solar panels are installed on the rooftops of Akbar Brothers
Group and Hirdaramani Group factories, while the Hirujanani solar panels are located on
the factory rooftops of Mona Exports (Pvt.) Ltd. and Mouldex (Pvt.) Ltd.
o Suryadhanavi Project :-
✓ Out of its 11.4 MW installed capacity, solar panels and equipment
equivalent to 10.2 MW were sold to the rooftop owners for a total
consideration of Rs.1,209,653,487.
✓ However, going forward, WIND will continue to provide annual
maintenance services for a fee.
* o Hirujanani Project :-
** ✓ The total 2.1 MW installed capacity was sold to the respective rooftop
owners, with WIND retaining responsibility for annual maintenance
services.

Note* - Project Suryadhanavi ✓ The total transaction value amounted to Rs.263,044,348. After the
Note** - Project Hirujanani transaction, shareholders other than WIND sold their shares to
Hirujanani, making it a fully owned subsidiary of WIND.
▪ Following the sale of the two projects, WIND plans to utilize the proceeds on new power
projects with higher earning potential than rooftop solar projects.

3. Recognition of Solar Universe (Pvt.) Ltd. as a subsidiary from August 2024

▪ WIND holds a 33.3% effective stake in Solar Universe (Pvt.) Ltd., a company based in
Description FY25E FY26E Vavunativu, Sri Lanka, which commenced operations in September 2022.

Revenue (Rs. mn) 6,659 7,383 ▪ Overall, the plant operates a total capacity of 10 MW generating an estimated output of
17.9GWh and contributing to an annual CO2 emission reduction of 12,709 MT.
Revenue
contribution from ▪ Previously, the project Solar Universe was jointly owned by WIND, Vidullanka PLC & Hi
144 227
Project Solar Energy Services (Pvt.) Ltd. However, on 11 July, WIND and Vidullanka entered into a
Universe (Rs. mn)
definitive share sale and purchase agreement with Hi-energy Services (Pvt.) Ltd. to acquire
Source: CT CLSA the holding held by Hi Energy (Pvt.) Ltd. for a consideration of Rs.370mn (Rs.185mn by
WIND).
▪ The completion of the transaction will increase shareholding of WIND’s in Solar Universe
from 33.3% to 50% and will be recognized as a subsidiary going forward. Overall, this
development will further bolster company’s topline and bottom-line.
▪ Also, a new license has been granted to the same consortium for the development and
operation of the Vavunathivu-II solar power plant, with an installed capacity of 10 MW in
Batticaloa District.

Note* - Project Solar Universe

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 WindForce

❖ New Projects –
1. Project Siyambalanduwa (100 MW) – Solar
▪ On 16 August 2023, WIND announced the development of a 100 MW solar park facility in
Siyambalanduwa on a Build, Own, Operate (BOO) basis, along with the construction of a
Turnkey Transmission facility.

▪ As per the Request for Proposal (RFP), three parties were involved in the power project
(WIND-30%, Lakdhanavi Ltd.-30%, and Blue Circle Pte Ltd.-40%. However, recent
developments have led to the full exit of Blue Circle Pte Ltd. from the project. As a result,
WIND's shareholding in the Rividhanavi project has increased from 30% to 50%, effective
from 11 September 2024.

* o As WIND's project stake increased to 50%, its equity contribution is expected to rise
from Rs.3,628,mn to Rs.6,041mn. However, raising funds for the project poses
concerns, given that the company is managing multiple projects simultaneously,
which may strain its financial capacity. The internal balances as of 30 June 2024
Note* - Project Vavunathivu-II
stand at:

Description 30 June 2024 – Rs. mn

Cash and Cash Equivalents 2,166

Short Term Financial Assets 2,252

Retained earnings 4,650

Proceeds from Sale of Rooftop Solar Projects 1,473

Source: CT CLSA

▪ Management has indicated that the project will operate under a dollar-pegged tariff structure
for energy supply over 20-year period, as stipulated in the PPA signed on 8 February 2024.
Additionally, the project includes a semi-annual payment structure for transmission facilities
over a period of 10 years.

▪ With the proposed dollar-pegged tariff, we expect the project to offset risks associated with
potential exchange rate fluctuations, thereby mitigating significant margin erosion from
unforeseen macroeconomic pressures.

▪ The earnings generated from the power project are expected to be substantial, with a strong
contribution anticipated from FY27E – FY28E onwards.

▪ Project details are as follows;

Project Location Siyambalanduwa in the Uva province of Sri Lanka

Ground Mounted Solar with Single Axis Trackers and BESS

Type of Power Plant
(Battery Energy Storage System) for Ramp Rate Control

Solar Park: 125MWDC and 100MWAC

Capacity
Battery Energy Storage System (BESS): 12MWh

200 Hectares of Government owned land to be subleased by

Project Land the Sri Lanka Sustainable Energy Authority (“SLSEA”) to
Rividhanavi (Private) Limited

A CT HOLDINGS GROUP AND CLSA GROUP COMPANY 8

 WindForce

27km, 132kV transmission line and a grid substation comprising

Transmission Facility of 2 x 63.5MVA 33/132kV Step up transformers and other grid
components, to be constructed and handed over to CEB

Fixed tariff of USD cents 8.0 per kWh paid in equivalent LKR
Tariff: Solar Park over the 20 Year term of the Power Purchase Agreement
(“PPA”)

Semi-annual annuity of USD 2,228,624.85 paid in equivalent

Annuity Payments:
LKR over the 10 Year term of the Contract for Development of
Transmission Facility
Transmission Facility (“TF Agreement”)

Estimated First Year

219 GWh
Annual Energy Generation

- Solar Plant and BESS :- USD 108mn (Rs.32,656mn)

- Transmission Facility :- USD 25mn (Rs.7,599mn)
Estimated Total Project
Cost - Total :- USD 133mn (Rs.40,215mn)
**Based on the USD/LKR rate (mid rate) of LKR 302.37 as at 31 July 2024
published by CBSL

- Debt :- 70% (USD 93mn), equivalent to Rs.28,120mn

Funding Mix - Equity :- 30% (USD 40mn), equivalent to Rs.12,094mn

**Based on the USD/LKR rate (mid rate) of LKR 302.37 as at 31 July
2024 as published by CBSL

Shareholding Structure of
Rividhanavi (Private) - LTL :- 50%
Limited/ Source of Equity - WIND :- 50%
Funding

Rs.6,047.4mn (for 50% of the total equity amount, amounting to

Investment by WIND USD 20.0mn based on the USD/LKR rate (mid rate) of
Rs.302.37 as at 31 July 2024 as published by CBSL)

Negotiations with both local banks and Development Financial

Source of Debt Funding Institutions (DFIs) are currently underway to obtain LKR and
USD denominated long term project financing.

Commencement of Construction: - 4Q2024E

Estimated Timeline
Commissioning Date – 1H2026E
Source: CSE

2. Project Vavunathivu-II (10 MW) – Solar - Recently Disclosed Project

▪ On 31 May 2024, Suryashakthi (Pvt.) Ltd. signed a Power Purchase Agreement for the
development of the 10 MW Solar Power Project (Vavunathivu-II) in Batticaloa district.
o Suryashakthi (Pvt) Limited is a wholly owned subsidiary of Solar Universe (Pvt.)
Ltd, which was a joint venture between WIND, Vidullanka PLC, & HiEnergy
Services (Pvt.) Ltd.
o However, with HiEnergy Services (Pvt.) Ltd. exiting the consortium, WIND and
Vidullanka entered into a definitive share sale and purchase agreement with
HiEnergy Services (Pvt.) Ltd on 11 July 2024, to acquire the remaining stake in the
project. This increased WIND’s ownership from 33% to 50%.

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 WindForce

▪ In summary, the project requires an estimated investment of about Rs.2.2bn and offers an
EIRR exceeding 15%. It will be financed with a 70:30 Debt to Equity ratio, utilizing WIND's
retained earnings for the equity portion (see chart on page 12).
▪ Based on management expectations, the project is anticipated to be fully commissioned by
the end of 3Q26E and is expected to make a significant contribution to WIND’s bottom line
from 4Q26E onwards.
3. Mannar 50 MW Wind Power Plant – Wind – Recently Bided Project
▪ On 14 March 2024, the Ministry of Power and Energy and CEB issued proposals for
* International Competitive Bidding (ICB) for a 50 MW wind farm facility in Mannar.
▪ The ICB sought developers with the requisite financial and technical capabilities to develop
the facility on a Build, Own, and Operate (BOO) basis, with private sector investors selected
through a competitive process for an operational period of 20 years.
▪ In response to the ICB, CEB received multiple bids for the project where WIND emerged as
the lowest bidder, proposing a tariff of US$ 0.0488 per unit (approximately Rs. 14.8 per unit
at an exchange rate of USD/LKR 305.00).
Note* - Project Vavunathivu-II ▪ However, the final decision regarding the award of the project to WIND has not been
announced . It remains pending at the date of this report.
4. EPC project for a 3rd party off-grid solar power project
▪ On 20 October 2024, WIND entered into an Engineering Design, Procurement, Installation,
Testing, and Commissioning (EPC) Contract for a 366 kWp rooftop solar PV power project
at Cocoon Island, Maldives.
▪ As per the entered agreement, WIND will manage the project for its client, Cocoon
Investment Pvt. Ltd., an established entity in the leisure segment with over three decades of
experience. Overall, the project is expected to be completed within a duration of 6 months.
▪ Under this comprehensive contract, WIND will be overseeing the entire project lifecycle—
from engineering design and procurement of components to installation, testing, and final
commissioning of the solar power system.
▪ The overall project cost, covering engineering, procurement, and commissioning (EPC),
totaled US$296,372.

❖ Key Risks with the project execution

▪ Project costs may exceed budgets due to factors beyond the company’s control such as unfavorable fluctuations in foreign
currency and unexpected delays in the construction process which could result in IRR of the project falling below the
benchmarks.
▪ Taking on larger projects poses numerous financial challenges, particularly in securing necessary financing. Additionally, higher
initial costs, limited local access for large scale projects, and fluctuation in interest rates could negatively affect projects
execution.
▪ Integrating renewable energy projects into the existing grids could pose technical challenges mainly in terms of maintaining grid
stability, voltage fluctuations, and intermittency management. Any disruptions on above areas may limit renewable energy
deployment according to agreed timelines.

❖ Strategies and actions taken by WIND to resolve potential risks

▪ WIND has successfully raised funds to execute its power projects in the pipeline, utilizing a variety of financing sources.
Furthermore, the substantial improvement in WIND's trade receivables and retained earnings positions serves as a robust
buffer, enabling intervention to protect their investments when needed.
▪ As an industry leader WIND has been working closely with the grid operators and infrastructure providers to address issues
related to grid integration and to ensure reliable electricity supply from its renewable energy projects.
o WIND's recent 100 MW projects include investments in grid substations to enhance compatibility and efficient
distribution of electricity generated by its power plants.
o Moreover, the proposed extensive transmission line (27km, 33/132kV) will efficiently transmit electricity from the
project site to selected regions with minimal losses, ensuring broad access to renewable energy

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 WindForce

Recovery of overdue receipts to propel growth

❑ During 1Q23 to 2Q24, WIND experienced adverse impacts on its operating cash flows due
to increased trade receivable positions.
o On an average, WIND reported a trade receivable position of Rs.4.9bn for each
quarter (same period above), causing financial and operational challenges.
o The increased trade receivable position compelled WIND’s credit period to extend
to 365 days, significantly surpassing the standard 45 days. This was primarily due
to the continuous delays in payments from CEB (the sole customer in SL
purchasing generated power from renewable energy companies like WIND).
❑ The delay in recovery of receipts from CEB was primarily due to financial and operational
constraints within the state-owned organization.
o Overall, CEB faced multiple constraints and limitations due to a decade-long
absence of a cost-reflective tariff system, which resulted in state-owned entity
reporting significant losses from 2013 to 2022. Consequently, these losses led to
payment delays to Non-Conventional Renewable Energy (NCRE) suppliers like
WIND.

CEB - Net Profit/(Loss) after Tax – Rs. bn – 2013 to 1H2024

200

123

100

-100

-200

-300

Source: CEB financials

Change in Consumer Tariff
❑ To address the issue, the Government of Sri Lanka decided to revise consumer electricity
tariff rates by introducing a cost reflective tariff system which as a result removed subsidies
on energy in SL (refer the chart on the left for recent changes in consumer tariffs).
o Overall, the introduction of the cost reflective tariff system enabled the CEB to
achieve profitability by the end 2023 and improve its cash flows accordingly.
However, as the power generation costs gradually declined, the implemented
formula led to multiple reductions in consumer tariffs during 1-3Q2024 to pass
the benefits to the general public.
o On a separate note, the improved cash flow position and improved operational
efficiency strengthened the financial position of the CEB and fast-tracked
settlement of outstanding arrears to WIND. As a result, WIND’s outstanding
trade receivable position declined to Rs.2.4bn as of 30 June 2024 (-3% QoQ,
-45% YoY), with all overdue balances fully settled.
❑ The demonstrated improvement in the CEB's financial position is expected to normalize the
Source: Public Source
settlement of payments to NCRE (including WIND) suppliers going forward, which is likely
to ensure more consistent cash flows, stabilizing the sector's financial health.

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WIND - Trade Receivable - Rs. mn – 1Q23 to 1Q25

6,000

4,800

3,600

2,400

1,200

Source: WIND financials

❑ The above chart illustrates the decline in WIND’s trade receivable position, which has been
driven by an increase in settlements of outstanding receipts, with a notable reduction in
3Q24.
❑ Overall, the reported recovery has strengthened WIND’s cash flow positions, enhancing its
ability to meet short-term obligations, address working capital requirements, and improve its
overall financial health, respectively.
❑ As a result of this reduction in trade receivable balances, WIND’s cash reserves have grown,
positioning the company to accelerate the execution of its planned power projects.
Furthermore, the strengthened financial position will allow WIND to explore new, higher
return investment opportunities accordingly.
❑ In the medium term, the anticipated unbundling of CEB is expected to drive improvement in
efficiency, transparency, and competition within SL’s energy sector. Also, the restructuring
will promote greater private sector involvement, benefiting both the state entity and (NCRE)
suppliers like WIND.
o Overall, these developments are likely to bolster WIND’s working capital and cash
liquidity in the near term, enabling the company to submit expressions of interest
for new renewable energy projects outlined in the government LTGEP 2023-2042E
plan, which could yield higher returns.
o However, it remains uncertain whether the new government will proceed with the
unbundling of CEB operations, leaving the potential impact of this reform on
WIND’s future plans yet to be fully determined

WIND – Cash and Cash Equivalents (Rs. mn) – 1Q23 to 1Q25 WIND – Retained Earnings (Rs. mn) – 1Q23 to 1Q25
Cash and Cash Equivalents (Rs. mn) Retained Earnings (Rs. mn) QoQ Growth (%) - RHS
QoQ Growth (%) - RHS
2,500 160% 6,000 36%

2,000 120% 4,800 24%

1,500 80% 3,600 12%

1,000 40% 2,400 0%

500 0% 1,200 -12%

0 -40% 0 -24%

Source: WIND financials Source: WIND financials

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WIND’s leadership in Sri Lanka’s renewable energy

revolution
To strengthen the country’s energy supply, several initiatives have been implemented by
Government in the recent past. The proposed LTGEP Base case plan (refer the table below),
prepared by the CEB, have laid out country’s power sector’s generating capacity
requirements for the forthcoming two decades. The focus is the establishment of a secure,
reliable, cost-effective and sustainable electricity supply for the entire nation.

❑ Overall, the LTGEP plan highlights the Government’s keenness to achieving four specific
objectives directly related to the future power generation mix where the objectives are
primarily focused at reaching country’s electricity demand and sustainability energy
targets. The objectives are;

o To achieve a 70% share of electricity generation in the country through

renewable energy (RE) sources by 2030E.
o To achieve carbon neutrality in power generation by 2050E.
o To cease building of new coal-fired power plants.
o New addition of firm capacity from clean energy sources such as Re-gasified
Liquefied Natural Gas (RLNG).
❑ To reach the targets in LTGEP plan, government intends to add a significant level of
renewable energy capacity (especially wind and solar) with 5,646 MW during 2023-2030E
period and 8,180 MW during 2031E-2042E period (total of 16,963 MW by end of
2042E).

Proposed Base Case (2023-2042E) – Renewable Capacity & Grid Scale Energy Storage Capacity Additions & Retirements
Grid Connected
Pumped Grid
Distribution Standalone
Hydro Storage Connected With Battery Mini Hydro -
Connected Fully Biomass – Battery Energy
Year power Plant Hydro Partially Energy Wind – MW
Embedded Facilitated MW MW Storage –
- MW power – Facilitated Storage –
Solar – MW MW/MWh
MW Solar – MW Solar – MW MW/MWh

2024E 31 - 160 223 100 - 20 60 20 20/50

2025E - - 165 80 260 100/400 25 200 20 -
2026E - - 170 70 260 100/400 25 290 20 80/320
2027E - - 170 50 280 100/400 25 250 20 -
2028E - - 170 40 310 150/600 25 200 20 200/800
2029E - 350 170 20 350 150/600 25 250 20 -
2030E - 350 170 30 250 125/500 10 200 20 -
2031E - 350 170 30 250 125/500 10 150 20 -
2032E - 350 170 30 250 125/500 10 150 20 -
2033E - - 170 30 300 150/600 10 150 20 -
2034E - - 180 30 300 150/600 10 150 20 -
2035E - - 180 30 300 125/500 10 150 10 50/200
2036E - - 190 30 300 100/400 10 150 10 100/400
2037E - - 190 30 300 100/400 10 150 10 100/400
2038E - - 200 30 300 100/400 10 150 10 100/400
2039E - - 200 30 300 100/400 - 150 10 100/400
2040E - - 200 20 300 115/460 - 150 10 100/400
2041E - - 200 20 300 125/500 - 150 10 100/400
2042E - - 200 20 300 125/500 - 150 10 150/600
Source - CEB LTGEP Report 2023E – 2042E
Note – Proposed project line above has been approved by the Cabinet of Ministers in November 2021 and issued by the Ministry of Power in January 2022.

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 WindForce

o Overall, the targets set, aim to increase the country’s wind capacity from current
265 MW to 1,723 MW by 2030E, with steady growth thereafter. Additionally,
the country’s solar capacity is to increase to 4,659 MW by 2030E and further
10,739 MW by 2042E, constituting the largest share in the incremental
renewable energy capacity additions. The significant expansion of wind and solar
power over the 20-year period will elevate the country to join nations with
substantial renewable energy generation capacities.

o In respect of the country’s hydro segment operations, most hydro resources have
already been utilized, limiting opportunities for companies solely focused on
hydro projects. Only 255 MW of mini hydro power projects have been identified
for the period from 2023 to 2042E.

❑ As projected, achieving the set targets in the LTGEP base case plan requires significant
involvement from established private sector players, both locally and internationally, on an
annual basis. Moreover, considering that less than 5% of the country’s wind and solar
WIND - Sri Lanka: Installed renewable resource potential is currently being developed, and recent government initiatives
Capacity vs. Effective Capacity to improve operations in the renewable energy space, the outlook for scaling operations is
Installed Capacity (MW) positive.
Effective Capacity (MW)
100 ❑ This indicates there is greater potential for WIND (current industry leader) to expand
significantly by leveraging their expertise and experience in solar and wind plant operations,
80 accordingly.
60 Why WIND is better placed to capture the growth in the renewable energy sector?
40 ❑ WIND was at the forefront of introducing wind power to Sri Lanka in 2010 with the launch
20 of operations at Seguvantivu and Vidatamunai power plants. Additionally, WIND was among
the early adopters of solar power, starting in 2016.
0
❑ Since its incorporation, WIND has successfully established eight mini-hydro plants, eight
wind power plants, and nine solar power plants across multiple districts in Sri Lanka. By
strategically positioning its power plants in regions with high wind density and solar
irradiation levels, WIND has gained a significant competitive advantage over local
Source: Company Annual Report
competitors.

o Currently, WIND boasts a total energy generating capacity of 146.1 MW in Sri

Lanka, with an effective capacity of 116.3 MW.

o In terms of near-term outlook, group is currently in the process of expanding its

project pipeline in the field of solar segment where two significant projects are
underway in Sri Lanka; a 100 MW solar park in Siyambalanduwa and 10 MW solar
power project in Batticaloa.

o The 2 projects are strategically located in South-East (with irradiation levels above
1,930 GHI levels) and North-eastern regions (with irradiation levels above 1,967
GHI levels) of the island, where higher solar irradiation levels are observed.

❑ In house resources to drive company’s growth;

o WIND possesses a highly skilled labour force and advanced technological

capability compared to its local peers. This is evidenced by WIND’s track record of
completing power station construction within maximum of one year, whereas
other local peers typically require a longer timeframe for completion.

o Furthermore, the speedy recovery of receipts from Government entities enhances

a positive outlook on the company’s financial position, positioning WIND to
capitalize on available market opportunities.

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 WindForce

❑ Moreover, the improved macroeconomic conditions in Sri Lanka are set to attract interest
from overseas investors, potentially enabling WIND to engage in partnership with them to
undertake large scale power projects in the country.

Description Jan 2023 Dec 2023 Jan 2024 June 2024 Oct 2024

USD Exchange Rate – Rs. 360.3 326.7 313.2 305.3 292.9

-TB - 3M - % 29.88 14.59 10.96 10.07 9.69
-TB - 6M - % 28.72 14.29 11.07 10.19 9.95
-TB - 12M - % 27.72 12.83 10.73 10.31 10.0
Inflation - % 54.2 3.4 6.4 1.6 -0.5*
-Comm. Bank AWPLR - % 24.82 12.46 11.91 9.65 9.31
-Comm. Bank AWPR - % 18.66 15.18 14.21 13.14 12.12
-Comm. Bank AWDR - % 14.63 12.11 11.15 9.05 7.70
Source: CBSL
Noe* - As at end September 2024

Monsoon boosts Sri Lanka’s hydroelectric and wind power

generation
❑ Due to continuous rainfall in the past three months (3Q2024), water levels in major
reservoirs for hydroelectric generation increased significantly, with some reservoirs even
reaching “spill-over” levels.
❑ As a result, the contribution of hydro power generation increased from 28% in May to 37%
by the end of Sep 2024, while electricity generation from thermal oil and coal fell below
15% and 40%, respectively. The improved hydro power output is expected to positively
impact WIND’s operations, as the company operates eight hydro power plants in SL.
❑ Additionally, improved wind density conditions boosted Sri Lanka's wind power generation
in 3Q2024 and are expected to positively impact WIND’s operations, as the company
operates eight wind power plants in the country.

Sri Lanka: Electricity generation – Contribution by main power generating sources - %

Hydro Coal Fuel Oil Wind

70%

60%

50%
32%
40%

30% 28%

28%
20%

4%
10%

0%

Source: CBSL
Note: - Latest data as at 08 December 2023

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 WindForce

Sri Lanka: Latest Status of Reservoirs – Active/Effective* Storages

Effective Storage Storage
Hydro Power - Reservoirs
17.06.24 01.07.24 15.07.24 29.07.24 12.08.24 23.08.24 02.09.24 13.09.24 30.09.24 11.10.24 (mcm)
Macro System
Mahaweli
• GDR (Kotmale) 67.8% 75.6% 72.2% 77.3% 76.7% 79.4% 77.6% 73.2% 60.5% 55.1% 170.9

• Victoria 56.2% 66.7% 72.1% 67.5% 60.4% 59.5% 58.7% 60.6% 53.8% 46.2% 721.2

• Randenigala 74.1% 63.6% 56.1% 55.5% 57.0% 65.4% 69.8% 73.8% 77.2% 81.8% 801.5

• Rantembe 65.0% 46.6% 58.8% 75.4% 73.9% 56.3% 18.2% 37.5% 51.7% 63.6% 7.0

• Bowatenna 47.4% 29.9% 20.0% 29.0% 61.9% 54.4% 57.0% 44.0% Low 32.5% 23.5

• Moragahakanda 57.4% 49.6% 38.8% 29.4% 26.0% 24.4% 25.8% 31.5% 39.5% 32.4% 557.9

• Kalu Ganga 84.7% 78.9% 73.9% 69.6% 67.1% 65.6% 64.4% 62.7% 60.4% 59.6% 248.0

Kelani
• Castlereigh 53.4% 60.2% 50.2% 50.8% 48.6% 54.8% 55.3% 56.7% 35.4% 28.8% 48.3

• Moussakele 78.1% 89.9% 85.8% 82.9% 77.7% 80.8% 78.4% 78.8% 70.9% 65.8% 123.3

Walawe
• Samanalawewa 68.6% 65.3% 62.7% 59.4% 57.2% 57.9% 57.5% 57.4% 52.0% 46.7% 278.0

• Uda Walawe Spill 87.5% 74.4% 74.1% 74.6% 79.6% 80.7% 86.7% 85.1% 94.4% 268.7

Effective Storage Storage

Hydro Power - Reservoirs
17.06.24 01.07.24 15.07.24 29.07.24 12.08.24 23.08.24 02.09.24 13.09.24 30.09.24 11.10.24 (mcm
Irrigation System
System H, IH, MH
• Dambulu Oya 66.7% 74.3% 74.3% 70.4% 70.4% 82.2% 59.4% 17.5% Low 82.2% 11.7

• Kandalama 85.0% 71.2% 62.5% 66.2% 67.3% 65.2% 64.1% 57.6% 54.2% 58.6% 33.8

• Kalawewa 85.6% 76.2% 58.2% 43.6% 47.0% 68.9% 57.0% 49.9% 36.0% 29.0% 104.0

• Rajangana(*) 97.2% 94.7% 91.9% 89.9% 88.4% 93.6% 89.9% 87.0% 83.4% 81.0% 100.7

• Nachchaduwa(*) 69.6% 53.8% 37.3% 28.5% 31.1% 40.1% 48.5% 52.8% 52.8% 52.8% 55.7

• Nuwarawewa(*) 74.9% 63.3% 54.2% 47.8% 45.2% 44.5% 43.2% 38.8% 33.3% 28.8% 44.5

• Tissawewa(*) 83.5% 63.3% 47.3% 58.4% 78.0% 98.2% 97.9% 93.4% 84.8% 71.7% 4.3

• Huruluwewa(*) 37.1% 23.5% 17.9% 14.4% 14.9% 14.5% 13.8% 10.5% 9.7% 10.4% 67.8
System D,G
• Giritale(*) 73.6% 67.4% 56.1% 47.6% 63.4% 74.8% 81.0% 82.3% 85.7% 85.7% 26.8

• Minneriya(*) 36.9% 22.6% 15.6% 6.2% 5.5% 2.9% Low Low Low 48.0% 135.7

• Kantale(*) 59.9% 50.6% 40.7% 31.6% 29.2% 28.4% 27.5% 26.0% 24.2% 26.5% 140.6

• Venderasan(*) 61.9% 54.6% 44.3% 34.3% 33.3% 32.7% 32.1% 31.2% 29.8% 32.1% 24.7

• Kaudulla(*) 75.4% 58.2% 45.8% 33.3% 28.3% 27.4% 26.1% 22.5% 21.0% 23.7% 128.3

• Parakrama
77.8% 75.4% 71.9% 70.8% 70.2% 79.6% 80.8% 80.2% 76.6% 78.4% 144.3
Samudraya(*)
System E,B,C

• Ulhitiya/Ratkinda 83.8% 84.6% 83.8% 86.7% 98.4% 76.0% 55.6% 26.7% 16.6% 26.9% 145.3

• Maduru Oya 67.8% 55.3% 44.3% 37.5% 38.5% 43.7% 45.9% 47.2% 44.5% 43.9% 596.6
Source: CBSL

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❑ Going forward, we expect the contribution from hydroelectric power generation to remain
moderate as rainfall levels are likely to be “near normal" during October to December 2024
(refer to the monthly rainfall forecasts for Oct to Dec 2024 below).
o October 2024: - Near-normal rainfall is likely across most parts of the country in
October 2024, with the potential for increased rainfall later in the month due to
developing atmospheric disturbances like low-pressure areas and depressions.
o November 2024: - In November 2024, Sri Lanka is expected to see near-normal
rainfall, except in Ampara and Batticaloa, which may experience below-normal
rainfall. If La Niña develops in October, areas like Mullaitivu, Trincomalee,
Vavuniya, Kilinochchi, Jaffna, Polonnaruwa, and Matale could also see below-
normal rainfall. However, the formation of lows or depressions could increase
rainfall.
o December 2024: - Global models suggest near-normal rainfall for Sri Lanka in
December 2024, except in Batticaloa and Mullaitivu, which may see below-
normal rainfall. Cyclones and wave disturbances could develop, potentially
altering the forecast.
❑ Considering the above forecasts, WIND’s hydro segment is expected to perform
moderately, benefiting from the strategic placement of power plants in high-catchment
areas.

Sri Lanka:- Rainfall Forecast – October and December 2024

Sri Lanka:– Weekly Rainfall forecasts for the month of October 2024

Source: Department of Meteorology

A CT HOLDINGS GROUP AND CLSA GROUP COMPANY 17

 ❑ Going forward, further contributions are expected from the country’s wind segment
operations as the period from the start of 1Q25 to mid-3Q25 generally favors wind power
generation.
❑ Additionally, the anticipated monsoon climate conditions are expected to strengthen wind
power generation during this period which will positively impact WIND’s financial
performance moving forward, as the company has strategically positioned its power plants
in regions with high wind density.
❑ Also, WIND’s first-mover advantage has enabled WIND to negotiate favorable tariff rates
and strategically position wind plants in areas with consistently high wind speeds
throughout the year. This strategic positioning will enhance WIND’s power generation
capacity and financial performance accordingly.
❑ Likewise, the company’s solar segment operations are expected to experience volume
growth throughout the quarter as both local and overseas solar power plants are
strategically situated in regions with the highest Annual Average Global Horizontal
Irradiance (GHI), resulting in elevated plant load factors. This strategic positioning ensures
optimal solar power generation and improved operational efficiency.

Source: National Renewable Energy Laboratory – Wind Energy Resource Atlas of Sri Lanka & Maldives, Prospectus, WIND Annual Report FY24

WIND: Geographical distribution of installed capacity

Ukraine

9 MW
1 Plant

Pakistan
68 MW
2 Plant `
Sri Lanka
85.0 MW 45.2 MW 15.9 MW
8 Plants 8 Plants 8 Plants

Uganda
10 MW 10.3 MW
1 Plant 2 Plants

Source: WIND Annual Report FY24, Public Sources

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 WindForce

❑ WIND expanded its operations into the international market through partnerships with
renowned brands in the global renewable energy generation space. In 2017, WIND marked
its entry into foreign markets by commissioning Harappa solar project (18 MW) in Lahore,
Pakistan.

❑ Some of the partnerships forged with foreign parties include:

o Norsk Solar – A Norwegian developer of solar power plants, the company is a

subsidiary of the largest private wind park developer in Norway.

o Frontier Energy – A private equity fund based in Denmark, with over 750MW of
renewable energy as a leading investor in the African region

❑ These partnerships have played a crucial role for WIND in broadening its presence and
utilizing these collaborations to support its international expansion initiatives.

❑ Currently 41% of WIND’s total installed capacity is located overseas (Pakistan, Uganda, and
Ukraine).

o This portfolio (97 MW) predominantly consists of solar and hydro power plants,
with 90% and 10% of the power plants comprising solar and hydro, respectively.

o The power plants have been constructed and are based in regions with abundant
renewable energy resources, ensuring optimal power harnessing capabilities.

Influx of foreign renewable energy players in Sri Lanka’s

market
❑ Recent economic indicators suggest that Sri Lanka's economy will grow in 2H2024E and
2025E, which typically leads to increased energy demand. This anticipated economic
growth is expected to create a more robust market for the renewable energy industry in
the near term, encouraging further investments and innovation in the sector.

❑ However, local industry players have faced ongoing challenges as they attempt multiple
large-scale projects. Many companies have reported cash flow constraints due to high
debt levels, limited working capital, and lingering effects of past macroeconomic
conditions.

❑ While certain concerns have been mitigated and positive macroeconomic developments
have emerged, uncertainties surrounding Sri Lanka's external debt restructuring with
commercial creditors and the stability of the political environment remain significant
challenges for industry growth. Consequently, foreign investors are monitoring these
developments closely. Should positive signals arise, they are poised to expand their market
presence in the country, leveraging substantial resources for rapid project execution.

❑ Given that Sri Lanka is rich in renewable energy sources, including solar, wind, hydro, and
biomass, and considering that the government has streamlined the regulatory process to
facilitate contracts for potential investors, the Sri Lankan government is actively seeking to
offer projects to attract foreign investors.

o To address concerns related to the tariff rate schemes impacting investments

brought in by foreign investors, regulatory authorities have introduced a
USD based tariff scheme for newly approved projects.

❑ For WIND's Siyambalanduwa 100 MW solar project, a USD tariff scheme was offered.
This development is expected to address concerns from both local (WIND) and foreign
investors about the currency crisis and margin deterioration resulting from factors like
suppressed interest rates.

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 WindForce

o Consequently, we anticipate a higher influx of overseas participation in the near

to medium term, potentially impacting the expansion strategies of local players
(such as WIND) in Sri Lanka. However, local players can navigate this scenario
by entering into strategic synergies with foreign companies and simultaneously
reap benefits from it.

o Some projects with foreign participation are;

No. Project Capacity Location Proposed by Investment

Wind power plant & 286 MW + 234 Mannar &

1 Adani Green Energy US$0.5bn
400Kv Transmission line MW Pooneryn

Ground Mount Solar &

2 100 MW Batticaloa Solar Forge N/av
Transmission line

Ground Mount Solar & Consortium of local

3 150 MW Hambantota N/av
Transmission line developers

Source: WIND financials and CT CLSA

Outlook and Valuation

❑ FY25E and FY26E NP forecasts have revised down by -8% and -4% to Rs.1,893mn (+22%
YoY%) and Rs.2,231mn (+17% YoY), respectively. The downward revisions were mainly
resulted due to the recent disposal of Project Hirujanani (total 2.1MW) and Project
Suryadhanavi (10.2 MW out of 11.4 MW).
❑ The near-term earnings for WIND are expected to remain positive, attributed to seasonal
factors such as higher wind density in Sri Lanka coupled with higher rainfalls in the
catchment areas.
o The higher rainfall recorded in the catchment areas of Sri Lanka during 2Q25,
along with anticipated rainfalls during 3Q25E, is expected to result in higher
contributions from WIND hydroelectric power generation operations in the
period ahead.
o The company's wind power segment’s power plants are expected to show a
significant increase in power generation volumes in 2Q25, with moderate growth
anticipated in 3Q25E due to expected improvements in wind patterns following
the monsoon period. This expectation aligns with the commissioning of new
plants in 2023 (Project Hiruras), leading to a greater contribution to the
company's bottom line from this segment.
o Company’s solar segment operations are expected to show volume growth
throughout the quarter as both local and overseas power plants have been
constructed on sites with high solar irradiation.
o In the context of the reduced interest rate environment, we anticipate positive
progress in WIND's EV segment operations, along with a moderate increase in EV
volumes. With the scalability of operations in this segment, we expect existing
operational losses to decrease and anticipate a turnaround going forward.
o Additionally, the off-grid solar power project completed during 1Q25 is expected
to contribute to earnings accordingly.
❑ The strengthened LKR against the USD since March 2023 is expected to alleviate WIND's
margin deterioration, as the company incurs a considerable portion of direct costs in USD
for local power plants, primarily related to maintenance and operations.
❑ Additionally, the full recovery of long outstanding receipts have improved company’s cash
reserves position in the near term, with WIND's receivable position at ~Rs.2.2bn as of 30
June 2024 (vs. Rs.5.5bn as of 31 March 2023). We believe the recovered receipts to be
invested primarily on new projects disclosed under the pipeline.

A CT HOLDINGS GROUP AND CLSA GROUP COMPANY 20

 WindForce

Outlook and Valuation (cont..)

❑ FY25E and FY26E earnings are likely to be boosted by the full year operation of Project
Hiruras (10 MW + 5 MW) and Kabithigollawa Project (10 MW). Additionally, we anticipate
a turnaround in WIND's EV mobility segment in FY25E, which will contribute positively to
WIND's overall earnings in the medium to long term.
o WIND further expects to commission the new 10 MW solar power project
(Vavunathivu II) during 2H2025E, further contributing to the company’s bottom
line.
❑ Overall, the WIND share has underperformed the market during the last 3 months rising
+7.5% (vs. ASPI gaining +10.9%). Also, during last 12 months, WIND share underperformed
the market rising +17.6% (vs. ASPI rising +19.5%).
❑ WIND trades at a forward PER of 15.3X for FY25E and 13.0X for FY26E, whilst offering a
ROE above 8% - 9.5% for the same period.
❑ Based on a SOTP valuation, we have revised down our 12M target price by -1% to Rs.25.0
(with dividend) which indicates a ~17% upside potential to current price levels and maintain
our rating as BUY.
❑ However, it is important to note that further upside is anticipated as the company expects
to commission 110 MW of solar power projects during 2H2025E and 1H2026E, aiming to
achieve a 500 MW milestone by 2027E.

WIND: Sum-of-the-parts (SOTP) Valuation

Description Fair Value (Rs. mn) Main Valuation Basis

Existing Project 29,648 Equal weightages between PER & EV/EBITDA valuation

EV Segment 1,050 DCF Valuation

Kabithigollawa Solar
1,576 DCF valuation
Project – 10 MW
Total Value 32,27

No. of Shares (mn) 1,351

Value per share – (Rs.) 23.9

Current Share price – (Rs.) 19.7

Dividend - Rs. - FY25E 1.1

Total Upside - % 17%

Source: CT CLSA

A CT HOLDINGS GROUP AND CLSA GROUP COMPANY 21

 WindForce

Major Shareholder Movements

Major Shareholders as at 30 June 2024

No. Name No. of Shares % Change (Shares)* Comment

1 Akbar Brothers Pvt Ltd 492,754,404 36.5% - -

2 Hirdaramani Private Limited 279,211,864 20.7% - -

3 Mona Exports (PVT) Limited 116,699,468 8.6% - -

4 BBH-Tundra Sustainable Frontier Fund 70,500,000 5.2% - -

5 Amaliya Private Limited 44,676,827 3.3% - -

6 Debug Investments (PVT) Ltd 44,615,357 3.3% - -

7 Mr. K.B.M.I. Perera 43,125,052 3.2% - -

8 Hirdaramani Power Private Limited 31,827,927 2.4% - -

9 Quick Tea (PVT) LTD 16,568,003 1.2% - -

10 J.B. Cocoshell (PVT) LTD 13,111,575 1.0% 7,500,000 -

11 Tea House (PVT) LTD 13,092,218 1.0% - -

12 Cocoshell Activated Carbon Company (PVT) LTD 12,600,000 0.9% - New Entrant

13 Mr. H.M. Udeshi 12,050,000 0.9% - -

14 Saboor Chatoor (PVT) LTD 8,300,000 0.6% - -

15 Mr. M.K.T. Darwazeh 7,413,761 0.6% - -

16 Mr. S.K.T. Darwazeh 7,413,761 0.6% - -

17 Mouldex (PVT) LTD 7,401,648 0.6% - -

18 Employees Trust Fund Board 6,984,333 0.5% - -

19 Marina Blue (Private) Limited 6,969,184 0.5% - -

20 Debug Renewable Energy Investment (Private) Limited 6,339,783 0.5% (23,060,217) -

Sub Total 1,241,655,165 91.9%

Total 1,350,768,942 100.0% -

*Change since 31 March 2024: Exited Top 20

Exited Top 20 (Name & No. of Shares Held): Falcon Trading (PVT) LTD; 4,325,314
Source: Wind financials

A CT HOLDINGS GROUP AND CLSA GROUP COMPANY 22

 Contact Information

Research Trading & Sales Consultant / Sales

Deshan Hettiwatte Dyan Morris Rohan Fernando

[email protected] [email protected] [email protected]
+94 11 255 2290 +94 11 255 2320 +94 11 255 2297
+94 77 722 4951 +94 76 778 2101
Stephenson Fernando
[email protected] Lasantha Iddamalgoda
+94 11 255 2290 [email protected]
+94 11 255 2295
Kugaprasath Thilagaratnam +94 77 778 2103
[email protected]
+94 11 255 2290 Manura Hemachandra
[email protected]
Kasun Herath +94 77 261 4797
[email protected]
+94 11 255 2290 Ryan Jansz
[email protected]
Pasanka Samayadasa +94 77 547 9233
[email protected]
+94 11 255 2290 Rajitha Weerakoon
[email protected]
Pramuditha Perera +94 77 320 4939
[email protected]
+94 11 255 2290 Dhammika de Silva
[email protected]
Chovini Kahawevithana +94 77 356 2699
[email protected]
+94 11 255 2290 Nuwan Madusanka
[email protected]
+94 76 858 9722

Arusha Michael
[email protected]
+94 77 395 6765

Anupa Illeperuma
[email protected]
+94 71 207 8180

Disclaimer: This document has been prepared and issued by CT CLSA Securities (Pvt) Ltd. on the basis of publicly available information, internally
developed data and other sources, believed to be reliable. Whilst all reasonable care has been taken to ensure that the facts stated are accurate
and the opinions given are fair and reasonable, neither CT CLSA Securities (Pvt) Ltd. nor any director, officer or employee, shall in any way be
responsible for the contents. CT CLSA Securities (Pvt) Ltd. may act as a Broker in the investments which are the subject of this document or in
related investments and may have acted upon or used the information contained in this document, or the research or analysis on which it is
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in the investments referred to in this document. This is not an offer to buy or sell the investments referred to in this document. It is not intended
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The markets in which CT CLSA Securities (Pvt) Ltd. operates may not have regulation governing conflict of interest over preparation and
publication of research reports (including but not limited to disclosure of perceived or actual conflict of interest) as may be found in more
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CT CLSA SECURITIES (PVT) LTD

A Member of the Colombo Stock Exchange

4-14 Majestic City, 10 Station Road, Colombo 4, Sri Lanka

General: +94 11 255 2290 to 2294 Facsimile: +94 11 255 2289
Email: [email protected] Web: www.ctclsa.lk

CT CLSAASECURITIES
CT HOLDINGS GROUP| AND
(PVT) LIMITED CLSA
A Member of GROUP COMPANY
the Colombo Stock Exchange 23