windforce limited
TRANSCRIPT
WINDFORCE LIMITEDINITIAL PUBLIC OFFER FACTSHEET
F E B R U A R Y 2 0 2 1
P R I V A T E & C O N F I D E N T I A L
T h e I n i t i a l L i s t i n g A p p l i c a t i o n s u b m i t t e d b y t h e c o m p a n y i s s u b j e c t t o a p p r o v a l o f t h e C o l o m b o S t o c k E x c h a n g e
218 MWInstalledCapacity
4Countries
of Operation
10Solar
Power Plants(123MW)
10Mini-Hydro
Power Plants(26MW)
7Wind
Power Plants(69MW)
LKR 3.2bn InvestmentRequired
AT A GLANCE
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The Company operates 27 power plants with an installedcapacity of 218MW (effectively controlling 126MW) having77% of the effective capacity based in Sri Lanka and the restacross Uganda, Pakistan and Ukraine
The Company has identified 2 further power projects andaims at raising funds for this through an IPO – part of theproceeds will be used to build a war-chest for future projects
WindForce Limited is a pioneer in wind power generation inSri Lanka and has expanded into solar power and mini-hydropower generation since starting operations in 2010. TheCompany is currently owned by highly reputed local familybusinesses – including Akbar Brothers Group, Hirdaramaniand MAS
Figures accurate as at 1 February 2021
SRI LANKA'S LARGEST AND MOST DIVERSE RENEWABLE ENERGY PRODUCER
P R I V A T E & C O N F I D E N T I A L
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KEY IPO HIGHLIGHTS
LKR 3.2bnTotal IPO Proceeds
LKR 16.00IPO Price per Share
15%Stake Offered
IMMEDIATE UPSIDE ON THE WINDFORCE SHARE
The IPO price per share of LKR 16.00 is at a 10%discount to the value per share of LKR 17.77 derivedfrom a DCF valuation – our primary valuationmethodology
10% DISCOUNT
The implied PER based on the expected FY21 earnings,of LKR 2,610mn, is at 7.04x – significantly lower than thecurrent sector trading market multiple of 13.1x*
7.04xIMPLIED PER
HIGH DIVIDEND YIELD AND UPSIDE FROM NEW PLANTS MAKES HOLDING LUCRATIVE
The Company is expected to maintain the currentdividend payout ratio of c. 80%. Based on this and onforecast earnings, the dividend yield (post-IPO) isexpected to be c. 9.5% over the next 4-years
9.5%DIVIDEND YIELD
IRR of c. 21% for an IPO investor through an exit in FY25 –with WindForce maintaining current dividend payingpatterns, and the cashflows from new projects (yielding amin. equity IRR of 15%) contributing to a higher exit price
21%IRR AT EXIT
LKR 927mn15MW Wind Plant
LKR 1,383mn30MW Solar Plant
LKR 932mnFunds Retained
USE OF PROCEEDS
*Market Data as at 31 January 2021 (Source: CSE, S&P CapitalIQ)
P R I V A T E & C O N F I D E N T I A L
THE LARGEST RENEWABLE ENERGY PLAYER TO BE LISTED ON THE CSE DISTRIBUTION OF POWER PLANTS BASED ON YEARS REMAINING IN SPPA
First mover advantage resulting in higher tariffs and PLFs across an operating portfolioof 27 plants generating 126MW with an immediate pipeline adding 33MW more
WindForce is over 5 times the size of the largest renewable energy player listed in theCSE, with an effective capacity1 of 126MW derived from 27 plants across 4 geographies
HIGHER TARIFFS AND PLFs DUE TO FIRST-MOVER ADVANTAGE
SOLAR WIND HYDRO
Average PLF (WindForce) 21% 35% 43%
Average PLF (Sri Lanka)2 17% 30% 39%
Average Tariff – WindForce (LKR/kWh)3 21.02 18.11 13.51
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6
23
22
1
21
1
1
2
9 10 11 12 13 14 15 16 17 18 ≥ 19
Nu
mb
er
of
Pla
nts
Years Left in the SPPA
Solar Power Plants Wind Power Plants Hydro Power Plants
2.5 MW 19.2 MW
1.2 MW33.5 MW
WindForce is the only player to diversify into all major forms of renewable energy – thisbalanced portfolio provides the Company a natural hedge in terms of revenue whencompared to competitors
Solar power plants have a minimum of 16 years left in the SPPA; guaranteeing stablecashflows to the Company for an extended period due to high fixed-tariff rates locked-infrom being one of the first players using the technology in Sri Lanka
IMMEDIATE PIPELINE ADDING AN EFFECTIVE CAPACITY OF 33MW
WindForce’s immediate project pipeline consists of two projects (a 15MW wind plant inMannar, Sri Lanka, and a 30MW solar plant in Senegal) – effectively adding 33MW –totalling an investment of LKR 2,310mn
WindForce has also identified several potential projects – both locally and overseas –which are still in their nascent stage that will benefit from readily available funds (LKR932mn remaining from the IPO proceeds)
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1Effective Capacity = Installed Capacity x WindForce’s Effective Shareholding2Assessment of Sri Lanka’s Power Sector, ADB/UNDP 20173Average tariff as at April 2020 across all local operational power plants
*Unless the identified project is of strategic importance in which case a lower IRR may beconsidered
The management has specified an initial investment criteria where the Company willonly invest in projects yielding a minimum 15% IRR*
30.0 MW
6.3 MW 20.0 MW
2.0 MW
3.3 MW
2.7 MW
89.0 MW
8.4 MW
P R I V A T E & C O N F I D E N T I A L
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INDUSTRY GROWING AT A 8% CAGR BETWEEN 2015 AND 2019
Asia has been the largest contributor to renewable energy growth whilst the lowadditions in Africa provide untapped potential for power producers to capitalise on
Favourable policy frameworks and declining generation costs fuelling an industrygrowing at 8% CAGR with identified geographies offering ideal conditions for investing-in
1,848
2,008
2,179
2,351 2,533
-300
200
700
1,200
1,700
2,200
2,700
0
200
400
600
800
1,000
1,200
2015 2016 2017 2018 2019
Ca
pa
city
/GW
Cumulative Renewable Energy Capacity (Global Overview)
Asia Europe + Eurasia
Americas Africa + ME
Oceania
Global weighted average costs for electricity from almost all renewable technologiesnow fall within the range of fossil fuels1 (USD 0.05 - 0.17/kWh) making the sectorincreasingly competitive in meeting consumer demand
Favourable policy frameworks and declining generation costs which were key driversbehind the recent capacity growth are expected to continue into the future making thisa positive indicator for companies such as WindForce
EXPANSION OPPORTUNITIES IN IDENTIFIED GEOGRAPHIES
• Sri Lanka is looking to add c. 3,500MW in alternative renewableenergy by 2039
• GoSL plans to source 70% of electricity from renewable sourcesby 2030
• Significant wind potential (above Class 4) and high GlobalHorizontal Irradiance (1,247 - 2,106 kWh/m2 per year) indicatedideal locations for generation
• Uganda and Senegal receive 3,000 hours of sunshine per year,and has untapped bodies of water – ideal environment forsetting up solar and mini-hydro power plants
• Uganda is massively underpenetrated in terms of thepopulation with access to electricity and GET-FiT tariff incentiveprovides additional remuneration for power producers
• Senegal aims to add c. 30% of its power from renewables
• Identified supply gap of 2,000MW2 and ease of securing fundingpresents an opportunity for foreign private power producers toenter and grow in the market
• Lucrative pricing mechanisms and Government initiativepaving way to add over 10GW of renewable energy to thesystem by 20303
1Renewable Power: Climate-Safe Energy Competes on Cost Alone, IRENA 20182Pakistan – Renewable Energy 2019, Export.gov3Renewables in Ukraine, KPMG 2019
P R I V A T E & C O N F I D E N T I A L
AN INTERNATIONALLY REPUTED CONSORTIUM OF INVESTORS
Internationally acclaimed investors and diverse panel of Directors coupled with industry-leading management and engineering teams driving performance at every level
Strong in-house engineering team of over 100 employees sets WindForce apart fromother players – having the capability of designing and constructing plants with minimal3rd party support – including in-house EPC and O&M competencies
Engineers certified through leading international institutions, in several modelling andsimulation technologies; including WAsP and PVSyst – making them some of the highestskilled engineers in the local renewable energy spaceSTAR PACKAGING – market leader in corrugated carton
manufacturing industry in Sri Lanka with close to 2 decades ofexperience
AKBAR BROTHERS – Sri Lanka’s largest Tea exporter which hasexpanded into a plethora of sectors since its inception in 1969
HIRDARAMANI – with 120+ years of presence, the HirdaramaniGroup is pioneer in the apparel industry and one of Sri Lanka’slargest apparel manufacturers
DEBUG GROUP – founded in 1989, the Debug group has played amajor role in the distribution of high quality IT products in thecountry
MAS – a USD 1.8 billion conglomerate and is regarded as one ofthe world’s most recognised apparel manufacturing firms. MAShas 48 manufacturing facilities across 15 countries
DIVERSE BOARD, QUALIFIED MANAGEMENT TEAM AND 100+ TECHNICAL TEAM
Management consisting of Chartered Certified Engineers and Accounting professionalswith over 130 years of combined experience gives an edge in spotting opportunities andensuring economical and efficient commissioning of new projects
Diverse panel of Directors – including engineers, accountants and lawyers – with experttechnical, business and legal knowledge continuously improving organizationalperformance and governance
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IMMEDIATE UPSIDE – IPO PRICE AT A 7x IMPLIED PER MULTIPLE
The implied PER based on the expected FY21 earnings, of LKR 2,610mn, is at 7.04x –significantly lower than the current sector trading market multiple
Immediate upside for an investor with the IPO price at a 7x implied PER multiple,however, a 21% IRR at exit offers incentive for investors going long on the share
HIGH DIVIDEND YIELD AND NEW PROJECT CASHFLOWS RESULTING IN A 21% IRR
*Pre-money valuation based on the existing projects only1Market Data as at 31 January 2021 (Source: CSE, S&P CapitalIQ)2Based on an EPS of LKR 1.87 for the Financial Year Ended 31 March 20203Based on a target EPS of LKR 2.27 for the Financial Year Ending 31 March 20214Based on an NAVPS of LKR 15.30 for the Financial Year Ended 31 March 2020
5Based on management’s budgeted dividend payout ratios, and minimum expected equityIRRs of future projects6Dividend yield calculated on the post-IPO valuation and number of shares7In Sri Lankan Independent Renewable Energy Power Producers (Source: S&P CapitalIQ)
WindForce’s dividend yield has been constantly higher than the industry average in thepast – despite adding more MW to its portfolio than its peers
Furthermore, our primary valuation methodology – the DCF – results in a price per shareof LKR 17.77 which is a 10% premium on the IPO price
PER P/BV
Market Cap. Weighted Peer Average1 13.1x 1.6x
WindForce Implied Multiple 7.0x 1.0x
VALUATIONMETHODOLOGY*
PRICE PERSHARE (LKR)
DISCOUNT TO IPO PRICE
Discounted Cash Flows 17.77 10%
PER – Trailing2 24.48 35%
PER – Forward3 28.78 44%
P/BV4 25.17 36%
Forecast 9.5% average dividend yield5 6 over the next 4-years – withthe cashflows coming in from the new projects
7.02%5.96% 6.72% 6.88%
10.04% 9.88%10.99%
7.82%
2017 2018 2019 2020
Dividend Yield Comparison FY17 – FY20
Peer Average Windforce
Based on an exit PER multiple of 13.1x1 and the forecasted dividendpayout – an IPO investor can secure a 21.4% IRR if they hold theWindForce shares until FY25
Sale of significant minority stakes7 in the past have also happenedat an average PER of 12.4x
21.4%Expected IRR
9.5%Dividend Yield
12.4xTransaction PER
P R I V A T E & C O N F I D E N T I A L
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IMMEDIATE PIPELINE
ANNEXUREPipeline Projects and Shareholding
PRE AND POST-IPO SHAREHOLDING
Installed Capacity - 15.00MW
Shareholding - 100%
Total Investment - LKR 3,090mnFunding Mix (D : E) - 70 : 30
Equity Investment - LKR 927mn(from WindForce)
Estimated Construction Start Date – Q4 2021Estimated Commissioning Date – Q4 2022
WIND PROJECTLOCATION: MANNAR, SRI LANKA
Installed Capacity - 30.00MW + 7.5MW Battery Storage
Shareholding - 60%
Total Investment - USD 39.24mnFunding Mix (D : E) - 70 : 30
Equity Investment - LKR 1,383mn(from WindForce)
Estimated Construction Start Date – Q4 2021Estimated Commissioning Date – Q4 2022
SOLAR PROJECTLOCATION: MBACKE, SENEGAL
SHAREHOLDER PRE-IPO POST-IPO
Akbar Brothers (Private) Limited 38.85% 33.02%
Hirdaramani (Private) Limited 24.32% 20.67%
Debug Investments (Private) Limited 14.29% 12.14%
Star Pack Investments (Private) Limited 9.36% 7.95%
Amaliya (Private) Limited 3.89% 3.31%
Mr. K.B.M.I Perera 3.15% 2.68%
Hirdaramani Power (Private) Limited 2.77% 2.36%
Mr. Maher Khalid Taleb Darwazah 0.65% 0.55%
Mr. Saad Khalad Taleb Darwazeh 0.65% 0.55%
Marina Blue (Private) Limited 0.61% 0.52%
Saboor Chatoor (Private) Limited 0.46% 0.39%
Mr. Mohomed Taleb Darwazah 0.32% 0.27%
Mr. Mazen Samih Taleb Darwazeh 0.21% 0.18%
Mr. R.P. Pathirana 0.17% 0.15%
Mr. Ahmad Khaled Taleb Darwazeh 0.17% 0.15%
Mr. Faisal Mohommad Darwazeh 0.14% 0.12%
IPO Shareholders - 15.00%
P R I V A T E & C O N F I D E N T I A L
DISCLAIMER
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This presentation has been prepared by Capital Alliance Partners Limited (“CAL”) and CT CLSACapital (Private) Limited (“CTCLSA”) and unless otherwise expressly authorized by CAL andCTCLSA, shall not be used by any third party. This report is for the use of the intendedrecipient only. Access, disclosure, copying, distribution or reliance on any of it by anyone else isprohibited and may be a criminal offence. The presentation does not constitute or form of anyoffer for sale or invitation, or solicitation of an offer, to subscribe for or purchase anysecurities and neither this presentation nor anything contained herein shall form the basis ofor be relied on in connection with any contract or commitment whatsoever.
This presentation has been prepared and issued on the basis of publicly available information,internally developed data and other sources, believed to be reliable. CAL and CTCLSA howeverdoes not warrant its completeness or accuracy. Opinions and estimates given constitute ajudgment as of the date of the material and are subject to change without notice. Thispresentation may contain forward-looking statements regarding, amongst other things, theCompany's outlook, business and strategy which are current as of the date they are made.These forward-looking statements are based largely on the current assumptions, expectationsand projections of the directors and management of the Company about the business, andthe industry in which the Company operates in. These statements are not guarantees of theCompany’s future performance and are subject to a number of risks and uncertainties, someof which are beyond the Company's control and are difficult to predict. Future developmentsand actual results could differ materially from those expressed in the forward-lookingstatements. In light of these risks and uncertainties, there can be no assurance that theforward-looking information will prove to be accurate. Certain data in this presentation hasbeen obtained from various external data sources and CAL and CTCLSA has not verified suchdata with independent sources.
The recipients of this presentation must make their own independent decision regarding anysecurities, investments or financial instruments mentioned herein. CAL, CTSLA, it’s directors,officers, consultants, employees, associates or business partners, will not be responsible, forany claims damages, compensation, suits, damages, loss, costs, charges, expenses, outgoingor payments including attorney’s fees which recipients of this presentation suffers or incursdirectly or indirectly arising out actions taken as a result of this presentation.
P R I V A T E & C O N F I D E N T I A L