Electricity, Good Business

Mackwoods (Pvt.) Ltd., one of the island’s oldest mercantile firms, plans to list its energy division.
The company which is the local agent for diesel powered generators both of US and Indian make, saw little threat to this business, despite a scenario of rising oil prices in the global market, coupled with increasing electricity costs.
Mackwoods Energy, with the sale of 4,000 generators since its inception in 2008, commands 20% of Sri Lanka’s  generator market, even exporting this capital good to countries such as the Maldives.
“With power outages taking place, especially in the periphery, fairly frequently, coupled with rising demand for electricity in the market, we don’t consider that such are impediments in growing sales to the market that we cater to, namely industries,” its Managing Director Arjuna Yatawara told reporters on Monday (March 12).
Mackwoods Energy Ltd., according to current prices, has a price to earnings ratio (PER) of 12 times. However with strong forecasts of increased profitability gains in the short term, PER is expected to come down to five, thereby making the company an attractive investment proposition, NDB Investment Bank’s director/CEO D. Perera said. NDB Investment Bank are financial advisers and managers to the issue.
The company also has five mini hydropower plants, four of which are in the upgradation stage and the other in the construction stage,  which are capable of generating 6.2 mega Watts of power. Mackwoods is negotiating to sell a unit of energy at Rs. 14, over a 20 year period to the grid.
Despite CEB’s parlous financial situation, due to the demand for electricity, and going from the experience of peer companies, CEB/Government of Sri Lanka ensures that payments to the grid’s suppliers’ of energy are made on time, said Yatawara.
The company plans to issue 25 million ordinary shares at Rs. 14 a share in this IPO which opens on Thursday (March 22). Post IPO, this quantity would be equivalent to 25% of the company’s issued share capital.