INVITATION TO THE INVESTOR

Hemas Power Limited - Initial Public Offeri

INVITATION TO THE INVESTOR

This invitation represents an opportunity to participate in the

future growth prospects of Hemas Power Limited, a key player in

the power generation sector in Sri Lanka. Since its incorporation

in 2003, the Company has established itself as a power sector

investment company with presence in both thermal and

non-conventional renewable energy sectors.

Through this Prospectus, Hemas Power Limited hereby wishes to

make an invitation in respect of Thirty One Million Three Hundred

Thousand (31,300,000) Ordinary Shares of the Company to the

general public at the Share Offer Price to be decided in terms of

Section 5.0 herein, payable in full on Application.

In this document, a prospective investor will find detailed information

about Hemas Power Limited and its business in addition to other

statutory information relating to the Offering. The Board of Directors

of the Company urge the investing public that the Prospectus be

read carefully prior to making an investment decision.

Hemas Power Limited - Initial Public Offerii

Approval from the Colombo Stock Exchange

This Prospectus is dated August 31, 2009 and has been lodged with the Colombo Stock Exchange.

The Colombo Stock Exchange (the “CSE”) has taken reasonable care to ensure full and fair disclosure of information in this Prospectus. However, the CSE assumes no responsibility for accuracy of the statements made, opinions expressed or reports included in this Prospectus. Moreover, the CSE does not regulate the pricing of the shares offered herein. The Share Offer Price will be determined in terms of the provisions contained herein.

Registration of the Prospectus

A copy of this Prospectus has been registered with the Registrar of Companies in Sri Lanka in accordance with the Companies Act No.07 of 2007 (the “Companies Act”). The following documents were attached to the copy of the Prospectus delivered to the Registrar of Companies in Sri Lanka:

1) The written consent by the Managers, Auditors and Reporting Accountants, Lawyers, Bankers and Registrars to the Offering for the inclusion of respective names in the Prospectus;

2) A declaration to the effect that the Managers, Auditors and Reporting Accountants, Lawyers, Bankers and Registrars to the Offering, have not withdrawn their consent referred to above, prior to the delivery of the Prospectus to the Registrar of Companies in Sri Lanka;

3) The written consent by the Auditors and Reporting Accountants and Bankers to the Company for the inclusion of respective names in the Prospectus;

4) A declaration to the effect that the Auditors and Reporting Accountants and Bankers to the Company have not withdrawn their consent referred to above, prior to the delivery of the Prospectus to the Registrar of Companies in Sri Lanka.

Further, a statutory declaration in terms of the Companies Act, to the effect that the Directors of the Company are held individually and collectively responsible for the accuracy of the information herein contained and that the listing rules of the CSE and the Companies Act have been complied with, has been filed for the purpose of registration of the Prospectus.

Responsibility for the Content of the Prospectus

This Prospectus has been prepared from information provided by Hemas Power Limited and from publicly available sources. The Directors of the Company, collectively and individually, having made all reasonable enquiries confirm to the Managers to the Offering, that to the best of their knowledge and belief, that this Prospectus contains all information with respect to the Company which is material in the context of the Offering; that the information contained herein is true and correct in all material respects and is not misleading; that there are no other material facts, the omission of which would, make any statement contained herein misleading; that the opinions and intensions expressed herein are honestly held and have been reached after considering all relevant circumstances and are based on reasonable assumptions. Hemas Power Limited accepts responsibility for the information contained in this Prospectus. While Hemas Power Limited has taken reasonable care to ensure full and fair disclosure of information, it does not assume any responsibility for any investment decisions made by investors based on information contained herein. In making an investment decision, prospective investors must rely on their own examination and assessments of the Company including the risks involved.

Representation

No person is authorised to give any information or make any representation not contained in this Prospectus and if given or made, any such information or representation must not be relied upon as having been authorised by the Company.

Hemas Power Limited - Initial Public Offeriii

Registration of the Prospectus in Jurisdictions Outside of Sri Lanka

This Prospectus has not been registered with any authority outside of Sri Lanka. This Prospectus does not constitute an offer to sell or a solicitation of an offer to buy, nor there be any sale of any shares offered herein, to any person in any circumstance or in any jurisdiction in which it is unlawful to make such an offer, solicitation or sale.

Forward Looking Statements

Any statements included in this Prospectus that are not statements of historical fact constitute “Forward Looking Statements”. These can be identified by the use of forward looking terms such as “expect”, “anticipate”, “intend”, “may”, “plan to”, “believe”, “could” and similar terms or variations of such terms. However, these words are not the exclusive means of identifying Forward Looking Statements. As such all statements pertaining to expected financial position, business strategy, plans and prospects of the Company are classified as Forward Looking Statements.

Such Forward Looking Statements involve known and unknown risks, uncertainties and other factors including but not limited to regulatory changes in the sectors in which the Company operates and its ability to respond to them, the Company’s ability to successfully adapt to technological changes, exposure to market risks, general economic and fiscal policies of Sri Lanka, inflationary pressures, the performance of financial markets both globally and locally, changes in domestic and foreign laws, regulation of taxes and changes in competition in the industry and further uncertainties that may or may not be in the control of the Company.

Such factors may cause actual results, performance and achievements to materially differ from any future results, performance or achievements expressed or implied by Forward Looking Statements herein. Forward Looking Statements are also based on numerous assumptions regarding the Company’s present and future business strategies and the environment in which the Company will operate in the future.

Given the risks and uncertainties that may cause the Company’s actual future results, performance or achievements to materially differ from that expected, expressed or implied by Forward Looking Statements in this Prospectus, investors are advised not to place sole reliance on such statements.

Investment Considerations

It is important that this Prospectus is read carefully prior to making an investment decision. For information concerning certain risk factors, which should be considered by prospective investors, see “Investment Considerations and Associated Risks” in Section 11.0 of this Prospectus.

Presentation of Currency Information and Other Numerical Data

The financial statements of the Company and currency values of economic data or industry data in a local context will be expressed in Sri Lankan Rupees. References in the Prospectus to “LKR”, “Rupees” or “Rs.” are to the lawful currency of Sri Lanka. References to “USD” are to United States Dollars, the official currency of the United States of America.

Certain numerical figures in the Prospectus have been subject to rounding adjustments; accordingly, numerical figures shown as totals in certain tables may not be an arithmetic aggregation of the figures that precede them.

Presentation of Macroeconomic and Industry Data

Economic and Industry data used throughout this Prospectus are derived from the Central Bank of Sri Lanka, the Public Utilities Commission of Sri Lanka, the Ceylon Electricity Board, Sustainable Energy Authority and various other industry data sources, which the Company believes to be reliable, but the accuracy and completeness of that information is not guaranteed. Similarly, industry surveys and other publications, while believed to be reliable, have not been independently verified and neither the Company nor the Managers to the Offering make any representation as to the accuracy of that information.

Hemas Power Limited - Initial Public Offeriv

SummARy Of THE OffERINg

NumbER Of SHARES ISSuEd 31,300,000

bOOk buIld PRIcE RANgE Rs. 17/-, Rs. 18/-, Rs. 19/- and Rs. 20/-

ISSuE OPENINg dATE September 17, 2009

EARlIEST ISSuE clOSINg dATE September 17, 2009

lATEST ISSuE clOSINg dATE October 07, 2009

Hemas Power Limited - Initial Public Offer1

TAblE Of cONTENTS

1.0 Corporate Information .................................................................................................................................................................2

2.0 Relevant Parties to the Offering ..................................................................................................................................................4

3.0 Abbreviations Used in the Prospectus ........................................................................................................................................5

4.0 Glossary of Terms Related to the Offering ..................................................................................................................................7

5.0 Details of the Offering ..................................................................................................................................................................8

6.0 The Power Sector of Sri Lanka .................................................................................................................................................18

7.0 Business Operations of Hemas Power Group ...........................................................................................................................31

8.0 Corporate Structure ...................................................................................................................................................................43

9.0 Financial Overview of the Company ..........................................................................................................................................52

10.0 Capital Structure ........................................................................................................................................................................56

11.0 Investment Considerations and Associated Risks .....................................................................................................................58

12.0 Statutory and Other General Information ..................................................................................................................................64

13.0 The Colombo Stock Exchange ..................................................................................................................................................65

14.0 Taxation and Exchange Controls ...............................................................................................................................................69

15.0 Statutory Declarations ...............................................................................................................................................................71

16.0 Financial Statements and Auditors’ Report ...............................................................................................................................72

Annex A - Glossary of Abbreviations and Industry .............................................................................................................................107

Annex B – Extracts From Articles of Association of the Company ....................................................................................................109

Annex C – Index on Tables and Figures Illustrated on the Prospectus .............................................................................................122

Annex D - Collection Points ...............................................................................................................................................................123


The Company Hemas Power Limited

Legal Form of the Company A private limited liability company incorporated in Sri Lanka on June 11, 2003 under the Companies Act No.17 of 1982, Re-registered under the Companies Act No.07 of 2007 on September 11, 2007 and subsequently converted to a public limited liability company on July 29, 2009.

Company Registration No. N(PVS) 34040

Re-Registration No. (As a Private Company)

PV 415

New Registration No.(As a Public Limited Company)

PV 415 PB

Place of Incorporation Colombo, Sri Lanka

Registered Office Hemas Building36, Bristol StreetColombo 01

Company Secretaries Hemas Corporate Services (Private) Limited36, Bristol StreetColombo 01

Auditors and Reporting Accountantsto the Company

M/s Ernst & YoungChartered Accountants201, De Saram PlaceColombo 10

Bankers to the Company Commercial Bank of Ceylon PLCForeign Branch21, Bristol StreetColombo 01

Hatton National Bank PLCCity Office16, Janadhipathi Mawatha Colombo 01

Hongkong and Shanghai Banking Corporation Limited24, Sir Baron Jayatilaka MawathaColombo 01

Standard Chartered Bank37, York StreetColombo 01

1.0 cORPORATE INfORmATION


Board of Directors

Name Designation

Mr. Husein Nuruddin Esufally Chairman/Non-Executive Director

Prof. Kulatilleke Arthanayake Malik Kumar Ranasinghe Independent Director

Mr. Sanjiva Kanishka Gamini Senanayake Independent Director

Mr. Imtiaz Abidhusein Esufally Non-Executive Director

Mr. Warnage Malinga De Fonseka Arsakularatne Non-Executive Director

Mr. Mahmud Riad Ameen Non-Executive Director

Mr. Godakande Aratchige Kishantha Nanayakkara Managing Director

cORPORATE INfORmATION


Financial Advisor and Manager to the Offering NDB Investment Bank Limited 40, Navam Mawatha Colombo 02

Legal Advisors/Lawyers to the Offering Nithya Partners Attorneys-at-Law 51, Gregory’s Road Colombo 07

Auditors to the Offering M/s Ernst & Young Chartered Accountants 201, De Saram Place Colombo 10

Registrars to the Offering S S P Corporate Services (Private) Limited 101, Inner Flower Road Colombo 03

Bankers to the Offering Bank of Ceylon 04, Bank of Ceylon Mawatha Colombo 01

2.0 RElEVANT PARTIES TO THE OffERINg


ASPI All Share Price IndexATS Automated Trading SystemAWPLR Average Weighted Prime Lending RateBOI Board of Investment of Sri LankaBOO Build Own OperateBOT Build Operate TransferCAGR Compounded Annual Growth RateCBSL Central Bank of Sri LankaCDS Central Depository Systems (Private) LimitedCEA Central Environmental AuthorityCEB Ceylon Electricity BoardCPC Ceylon Petroleum CorporationCSE Colombo Stock ExchangeDGEU Department of Government Electrical UndertakingsEIA Environmental Impact AssessmentESC Economic Service ChargeFCBU Foreign Currency Banking UnitFSA Fuel Supply AgreementFY Financial YearGDP Gross Domestic ProductGoSL Government of Sri LankaGWh Gigawatt-hourha HectareHFO Heavy Furnace OilIEE Initial Environmental ExaminationIPO Initial Public Offeringkm KilometerkV KilovoltkWh Kilowatt-hourLECO Lanka Electricity Company LTGEP Long Term Generation Expansion PlanLOI Letter of IntentMGEA Minimum Guaranteed Energy Amount MPI Milanka Price IndexMVA MegavoltampereMW MegawattNCRE Non-Conventional Renewable Energy NEPSL National Energy Policy of Sri LankaNIC National Identity Card O&M Operation and MaintenancePLF Plant Load FactorPOA Power of Attorney

3.0 AbbREVIATIONS uSEd IN THE PROSPEcTuS


PPA Power Purchase AgreementPUCSL Public Utilities Commission of Sri LankaRANSI Rupee Account for Non-Resident Sri Lankan InvestmentSEA Sustainable Energy AuthoritySEC Securities and Exchange Commission of Sri LankaSFA Syndicate Facility AgreementSHP Small Hydropower PlantSIERA Share Investment External Rupee AccountSLCPI Sri Lanka Consumer Price IndexSPPA Standardised Power Purchase AgreementUNDP United Nations Development ProgrammeUSCPI United States Consumer Price IndexV Volt

AbbREVIATIONS uSEd IN THE PROSPEcTuS


Application Form/Application The Application Form that constitutes a part of this Prospectus through which the investors may apply for Offered Shares

Book Build Price Range The range of prices available for investment in shares of HMP as detailed under Section 5.9 and Section 5.10 of this Prospectus. An investor may select one of these prices in line with his perception of the value of the Offered Shares

Closure Date The date of closure of the subscription list in terms of Section 5.7 of this Prospectus

Foreign Investor Citizen of Sri Lanka resident outside Sri Lanka who is above 18 years of age; Citizen of a foreign state, whether resident in Sri Lanka or resident outside

Sri Lanka who is above 18 years of age; A corporate body incorporated outside Sri Lanka; Country funds and regional funds approved by the Securities and Exchange

Commission.

HHL Hemas Holdings PLC

Local Time Sri Lanka Time

Market Day Any day on which the Colombo Stock Exchange is open for trading

New Shares/Offered Shares Thirty One Million Three Hundred Thousand (31,300,000) new Ordinary Shares each issued by the Company, to the general public at the Share Offer Price

Offer for Subscription An invitation to the public by the Company to subscribe for Thirty One Million Three Hundred Thousand (31,300,000) new Ordinary Shares of the Company in terms of Section 5.1

Offering The Offer for Subscription under the provisions of this Prospectus

Ordinary Shares/Issued and Paid up Ordinary Shares/Ordinary Voting Shares

Ordinary voting shares of the Company, as per the Articles of Association of the Company

Prospectus This Prospectus dated August 31, 2009 issued by Hemas Power Limited

Share Offer Price The price determined by the book building process outlined in Section 5.15

Specified Price The Price at which a prospective investor applies for the Offered Shares, in accordance with the investor’s estimate or the perceived value of the Offered Shares. The options available in the Application Form for this purpose are Rs. 17/-, Rs. 18/-, Rs. 19/- and Rs. 20/-

Stated Capital The Stated Capital of Hemas Power Limited

the Board or Board of Directors The Board of Directors of Hemas Power Limited

the Company, Hemas Power or HMP Hemas Power Limited

the HMP Group/the Group HMP and its joint venture/subsidiaries, Heladhanavi Limited, Giddawa Hydro Power (Private) Limited and Okanda Power Grid (Private) Limited

the Hemas Group Hemas Holdings PLC and its subsidiaries

the Manager/Financial Advisor and Manager to the Offering/Managers to the Offering

NDB Investment Bank Limited

4.0 glOSSARy Of TERmS RElATEd TO THE OffERINg


5.1 The Offering

The Offering contemplated herein shall constitute an invitation made to the general public to purchase Thirty One Million Three Hundred Thousand (31,300,000) new Ordinary Shares of the Company at the Share Offer Price.

5.2 Nature of the Offered Shares

The Offered Shares shall rank pari passu with the existing Ordinary Shares of the Company with full voting rights and the right to participate in any dividend declared to ordinary shareholders by the Company after the allotment of the Offered Shares and the right to an equal share in the distribution of the surplus assets of the Company on liquidation.

5.3 Share Offer Price

The Company in consultation with the Managers to the Offering will determine the Share Offer Price based on the estimated demand for the Offered Shares by prospective investors established through a book building process morefully described in Sections 5.9, 5.10 and 5.15 in this Prospectus.

5.4 Objectives of the Offering

1. The Company is planning to develop a second small hydro power project under its fully owned subsidiary Okanda Power Grid (Private) Limited (Magal Ganga Project) at a presently estimated investment of Rs. 430 Million. The equity portion of this investment amounting to Rs. 280 Million is expected to be funded through proceeds of the Offering. The balance funds needed for the investment in the Magal Ganga Project would be funded through debt as and when the requirement arises. The details of the Magal Ganga Project are available in Section 7.5 of this Prospectus.

2. The Company also expects to make investments in other viable power generation projects. These may be greenfield projects and/or acquisition of currently operational projects. The availability of readily investable funds provides a solid backing for the Company to identify and pursue prospective investments in the power generation sector. The Company intends to utilise the remainder of the proceeds raised via the Offering for this purpose.

In addition to raising funds through this Offering for investments, the Company intends to strengthen its identity by enabling a broader scale of public ownership in the Ordinary Shares of the Company.

Further, the Offering is expected to facilitate the listing of the Company’s Ordinary Shares on the Main Board of the CSE,

subject to compliance with Rule 2.1.2(c) of the CSE Listing Rules. As per this Rule the Company must have a minimum Public Holding of 25% of the total number of shares for which listing is sought and such shares should be in the hands of a minimum number of 1,000 public shareholders holding not less than 100 shares each.

Both HMP and its parent Hemas Holdings PLC (HHL) believe that execution of activities mentioned herein are vital for the growth of the Company’s power generation business. This Offering is not underwritten and the Company proposes to utilise internally generated funds and borrowings in the event of a shortfall in IPO proceeds.

5.5 Cost of the Offering

All direct costs and expenses associated with the Offering, inclusive of but not limited to offer listing fees to CSE, management/advisory fees to the Managers to the Offering, fees for the registrar function, other advisory fees, certain legal, consultancy and accountancy fees, advertising and promotional costs, printing costs and brokerage commissions are estimated to be approximately Rs. 25 Million (at the highest specified price in the Book Build Price Range excluding applicable taxes). The Company shall bear all direct and indirect costs related to the Offering.

5.0 dETAIlS Of THE OffERINg


5.6 Listing

The Offering herein contemplated comprises of Thirty One Million Three Hundred Thousand (31,300,000) Ordinary Shares offered to the public. The Offered Ordinary Shares amounts to 25% of the Issued and Paid up Ordinary Shares of the Company subsequent to the Offering. An Application has been made to the CSE for permission to deal in and for a listing of One Hundred and Twenty Five Million Two Hundred Thousand and Two (125,200,002) Ordinary Shares being the entirety of Issued and Paid up Ordinary Shares of the Company subsequent to the Offering.

Upon the successful completion of the Offering, the Company will be listed on the Main Board of the CSE, subject to compliance with Rule 2.1.2(c) of the CSE Listing Rules (as disclosed in Section 5.4).

5.7 Subscription List and Closure Date

The subscription list for the Offered Shares will open at 9.00 a.m. on September 17, 2009 and shall remain open for fourteen (14) Market Days until closure at 4.30 p.m. on October 07, 2009. The Board reserves the discretion to close the subscription list on any Market Day within the period of fourteen (14) Market Days irrespective of the number of shares subscribed by providing one (01) Market Day’s prior notice to the CSE.

In the event of an over subscription of the Offered Shares prior to the date scheduled as the closing date of the period for subscription, the Company shall inform the CSE in writing immediately of such fact and, with the agreement of the CSE the subscription list will be closed at 4.30 p.m. on the same day on which it is fully subscribed.

5.8 Eligible Applicants

Applications are invited from the following categories of applicants: Citizens of Sri Lanka who are resident in or outside Sri Lanka and above 18 years of age; Companies, corporations or institutions incorporated or established within Sri Lanka; Corporate bodies incorporated or established outside Sri Lanka; Approved provident funds and contributory pension schemes registered/incorporated/established in Sri Lanka (in this

case applications should be in the name of the Trustee/Board of Management in order to facilitate the opening of the CDS account);

Foreign citizens above 18 years of age (irrespective of whether they are resident in Sri Lanka or overseas); Regional and country funds approved by the SEC.

Please note that Applications made by individuals under 18 years of age or those in the names of sole proprietorships, partnerships, unincorporated trusts and non-corporate bodies will be rejected at the outset.

5.9 The Book Building Process

The book building process refers to the mechanism of determining the Share Offer Price through the collation of bids received within the Book Build Price Range from prospective investors, in line with this Prospectus. The Company, the Manager and the Registrars to the Offering will be the principal parties involved in the book building process.

5.10 Selection of a Price for Application

Investors are requested to select only one (01) of the prices indicated in the Book Build Price Range. The selection of the price should be based on the prospective investor’s individual judgement on the value of the Company’s Offered Shares. The final price selected by the prospective investor will be termed as the Specified Price which should be clearly indicated in the space provided in the Application Form.

dETAIlS Of THE OffERINg


Application Forms indicating two or more prices as the Specified Price will be rejected at the outset. The cheque or bank draft or bank guarantee should be issued to the exact value of the number of shares applied for multiplied by the Specified Price. Any Application Form accompanied by a cheque or bank draft or bank guarantee not conforming to the above requirement will be rejected at the outset.

The Book Build Price Range is as follows;

Rs. 17/- Rs. 18/- Rs. 19/- Rs. 20/- Investors should not either individually or jointly submit more than one Application Form stating different prices within the Book

Build Price Range. In such a case, all Applications may be rejected or one such Application may be accepted in full or in part, solely at the discretion of the Company/Managers to the Offering.

5.11 Consideration The Company and the Board of Directors of Hemas Power Limited are of the opinion that the Book Build Price Range given

under Section 5.10 is fair and reasonable to the Company and to all existing shareholders of the Company.

5.12 Procedure for Applications

Applications may be made forthwith and accordingly. Applications duly completed will be accepted in the manner set out in Section 5.12.11 hereunder.

5.12.1 The Prospectus and Application Forms The Prospectus and Application Forms will be available free of charge from the collection points listed in Annex D. Investors

must apply for shares on the Application Form, which constitutes part of this Prospectus. The Application Form should be legibly completed and be received by the Registrars to the Offering (please refer Section 5.12.11 for further details on submission of Applications and Registrars to the Offering). Application Forms can also be downloaded from www.hemas.com, www.cse.com and www.ndbib.com. Exact size photocopies of the original Application Form will also be permissible.

Care must be taken to follow the instructions on the reverse of the Application Form. Applications that do not strictly conform to such instructions and additional conditions set out hereunder or which are illegible may be rejected.

5.12.2 Number of Shares Applied

Applications should be made for a minimum of one hundred (100) shares or in multiples of one hundred (100) shares thereof.

Applications made for less than one hundred (100) shares or for a number which is not in multiples of hundred (100) shares will be rejected and accompanying cheques or bank drafts or bank guarantees will not be sent for clearing and be returned via ordinary post at the risk of the applicant, or in the case of joint applicants, the first named applicant. The cheque or bank draft or bank guarantee should be issued to the exact value of the number of shares applied for multiplied by the Specified Price. Cheques or bank drafts or bank guarantees not conforming to the above requirement will be rejected at the outset.

Please refer Section 5.13.1 for details with respect to the mode of remittance.

5.12.3 Identification Information All applicants should disclose their identification/registration information by filling in the space provided in the Application Form

for this purpose.



Applicants are requested to state their residency and nationality in the appropriate cages provided in the Application Form.

The NIC, passport, or company registration number as the case maybe, must be stated in the Application Form and any Application Form which does not provide the appropriate identification information will be strictly rejected.

Tabulated below is the relevant identification information that a prospective investor should provide depending on the legal status.

Citizenship/ Legal Form Identification Information

NIC Number Passport Number

Company Registration

NumberCDS Number

Common Seal or Rubber

StampSri Lankan Citizens

Sri Lankan Citizens with no NIC – Note I

Foreign Citizens – Note II

Corporate Entities – Note III

Note I: In the case of Sri Lankan citizens the passport number will be accepted only when the NIC number is not available and provided such applicants directly lodge their shares with the CDS. The CDS account must be for the same passport number.

Note II: Foreign citizens must state the passport number in the space provided.

Note III: The company registration number must be provided. The common seal or rubber stamp should be affixed and the Application Form duly signed as stipulated in the constitutional documents of such applicant.

5.12.4 Responsibility of a Non-Resident Investor

Non-resident investors may be affected by the laws of the jurisdiction of their residence. If the non-resident investors wish to apply for the shares at the Initial Public Offering, it is their responsibility to comply with the laws relevant to the jurisdiction of their residence and of Sri Lanka.

5.12.5 Direct Lodgement in the CDS

Applicants wishing to lodge the shares directly to their CDS account should state their own CDS account number in the space provided in the Application Form. Application Forms stating third party CDS accounts instead of their own CDS account numbers, except in the case of margin trading, will be rejected.

5.12.6 Margin Trading

Applicants who wish to apply through their margin trading account, should submit the Application in the name of the “margin provider/applicant’s name” signed by the margin provider. The applicants should state the relevant CDS account number relating to the margin trading account in the space provided for the CDS account number in the Application Form.

The NIC, passport, or company registration number of the applicant as the case maybe, must be stated in the Application Form.

A photocopy of the margin trading agreement must be submitted along with the Application.



Please note that the margin provider can apply under its own name and such Applications will not be construed as multiple Applications (details of multiple Applications are available under Section 5.12.9).

5.12.7 Applications Made Under Power of Attorney

In the case of Applications made under Power of Attorney (POA), a copy of the said POA, certified by a Notary Public to be a true copy of the original, should be lodged with the Registrars to the Offering along with the Application Form. The original POA should not be attached.

5.12.8 Joint Applications

Application Forms with more than one but not exceeding two applicants are permitted. Joint applicants should note that both parties should either be residents of Sri Lanka or non-residents. An applicant of a joint Application shall not apply through a separate Application Form either individually or jointly. Only one Application will be accepted on behalf of a natural person or corporate body.

5.12.9 Multiple Applications

An applicant can apply under only one Application Form. If an applicant has applied under more than one Application Form it will be construed as multiple Applications. An applicant of a joint Application, applying through another Application Form is also deemed to have made multiple Applications. An applicant who has made an Application under a margin trading account should not apply individually or jointly through a separate Application Form. Such Applications will also be construed as multiple Applications.

The Company/Managers to the Offering reserves the right to reject all multiple Applications and suspected multiple Applications or to accept only one Application Form at their discretion.

5.12.10 Rejection of Applications

- Application Forms which are incomplete in any way and/or are not in accordance with the terms and conditions set out in Section 5.0 of this Prospectus will be rejected at the absolute discretion of the Company/Managers to the Offering.

- Any Application Form which does not provide the NIC, passport, or company registration number as the case maybe, will be strictly rejected.

- Applications delivered by hand after the closure of the Offering will be rejected. Applications received by courier/post after 4.30 p.m. on the succeeding Market Day immediately following the Closure Date of the Offering, will also be rejected even if they carry a courier acceptance date/postmark date earlier than the Closure Date.

- Applications made for less than one hundred (100) shares or for a number which is not in multiples of hundred (100) shares will be rejected.

- In the case of multiple Applications and suspected multiple Applications the Company/Managers to the Offering reserves the right to reject all or to accept one Application Form at their discretion.

- An Application Form accompanied by two or more cheques or bank drafts or bank guarantees will be rejected at the outset.

- Applications made by individuals under 18 years of age or those in the names of sole proprietorships, partnerships, unincorporated trusts and non-corporate bodies will be rejected.

Notwithstanding any provision contained herein, the Board of Directors shall reserve the right to refuse any Application or to accept any Application in full or part.



5.12.11 Submission of Applications

Application Forms properly filled in accordance with the instructions thereof, along with the applicable remittance (cheque or bank draft or bank guarantee only) for full amount payable on application should be enclosed in a sealed envelope marked “Hemas Power Limited – Initial Public Offering” and be addressed and dispatched by post or courier or by hand to the Registrars to the Offering at the following address prior to 4.30 p.m. Local Time on the Closure Date.

Registrars to the Offering S S P Corporate Services (Private) Limited 101, Inner Flower Road Colombo 03

Applications may also be handed over to the Managers to the Offering, the Bankers to the Offering and its designated branches, members and trading members of the CSE and NDB Bank Branches as set out in Annex D.

In the case of Applications dispatched by courier or post, such Applications should reach the Registrars to the Offering no later than 4.30 p.m. on the Market Day immediately following the Closure Date. Any Applications received after the above deadline shall be rejected even though the courier or post mark is dated prior to the Closure Date.

5.13 Payment of Application Monies

5.13.1 Mode of Remittance

Payment should be made separately in respect of each Application by way of a cheque or bank draft or bank guarantee. Remittances on Applications will be deposited in a separate bank account in the name of “Hemas Power Limited – Initial Public Offering”.

Payment for Applications for values up to Rupees One Hundred Million (Rs. 100,000,000/-) could be supported by a cheque or bank draft or bank guarantee. Payment for Applications above and inclusive of Rupees One Hundred Million (Rs. 100,000,000/-) should only be accompanied by a bank guarantee.

Each Application Form should be accompanied by only one cheque or bank draft or bank guarantee and should be issued for the full amount indicated in the Application Form. An Application Form accompanied by two or more cheques, bank drafts or bank guarantees will be rejected at the outset.

Cash will not be accepted. However, anyone wishing to pay cash may obtain a bank draft at a nominal fee from any of the Bank of Ceylon branches specified in Annex D of this Prospectus.

5.13.2 Cheques or Bank Drafts – Resident Sri Lankan Investors

Cheques or bank drafts should be drawn on any commercial bank in Sri Lanka and crossed “Account Payee Only” and made payable to “Hemas Power Limited – Initial Public Offering”.

Cheques or bank drafts accompanying Application Forms made for less than one hundred (100) shares or for a number which is not in multiples of hundred (100) shares (as mentioned in Section 5.12.2) will not be sent for clearing and shall be returned via ordinary post at the risk of the applicant, or in the case of joint applicants, to the first named applicant.

In the event that cheques are not realised within three (03) Market Days from the day of presenting the same to the bank for clearing, the monies will be refunded and no allocation of shares will be made to the investors.



Investors residing in outstation areas from which cheque clearance may take over two (02) days are advised to make payment via bank drafts to avoid any delays.

Cheques must be honoured on first presentation to the bank for the Application to be valid. Applications supported by cheques which are not honoured on the first presentation will be rejected.

5.13.3 Bank Guarantees – Resident Sri Lankan Investors

Applications made by resident Sri Lankan investors backed by bank guarantees presented in line with the requirements set out in Section 5.13.1 will be accepted. Bank guarantees will be presented to the respective banks only after the shares have been allotted/allocated. Bank guarantees should be issued in favour of “Hemas Power Limited – Initial Public Offering”, in a manner acceptable to the Company and be payable on demand.

Investors are advised to ensure that sufficient funds are made available in order to honour the bank guarantee, inclusive of charges, when called upon to do so by the Registrars to the Offering. Investors are encouraged to discuss with their relevant bankers with regard to the issuance of bank guarantees and all related charges that would be incurred by the investors.

Foreign investors and non-resident Sri Lankan investors should refer Section 5.13.4 for information regarding procedures for bank guarantees.

5.13.4 Foreign Currency Remittance This section is applicable to citizens of Sri Lanka who are above 18 years of age and resident overseas, corporate bodies

incorporated or established outside Sri Lanka, regional or country funds approved by the SEC and foreign citizens (irrespective of whether they are resident in Sri Lanka or overseas) who are above 18 years of age.

The above mentioned applicants should make their payments using one of the following methods as the case may be.

A Foreign Investor may invest through a Share Investment External Rupee Account (SIERA) maintained with any commercial bank in Sri Lanka. The procedure for arranging payments through a SIERA is presented below;

- A Foreign Investor may use the services of a custodian bank as an intermediary when investing in the Sri Lankan securities market.

- The intermediary may open a SIERA, on the investor’s behalf. In conjunction with the SIERA, an account with the CDS must be opened.

- In respect of regional or country funds investing for the first time in Sri Lanka the intermediary will facilitate the approval process regulated by the SEC.

- Payment for shares should be made through a cheque or bank draft or bank guarantee against the funds in the SIERA and made payable to “Hemas Power Limited – Initial Public Offering”.

A Foreign Investor may invest through inward remittances of foreign currency held in a Foreign Currency Banking Unit (FCBU) account of the applicant maintained with any commercial bank in Sri Lanka. The applicant should forward the Application Form supported by a bank guarantee drawn on the applicant’s FCBU account pending allotment of shares.

- Upon allotment of shares, foreign currency to the extent of the Sri Lankan Rupee equivalent value of shares allotted would be called on the bank guarantee drawn on the applicant’s FCBU account. The requisite funds would then be credited to a SIERA opened in favour of the applicant via the aforementioned FCBU account.

- This procedure would protect a prospective investor from any losses accruing due to fluctuating exchange rates.



Non-resident Sri Lankans can remit money for investment purposes in Sri Lankan companies through Rupee Accounts for Non-Resident Sri Lankan Investment (RANSI) maintained with authorised dealers.

- Sri Lankan citizens who have left the country to take up employment, business or a profession and continue to reside abroad and those citizens of Sri Lanka who have made their permanent place of abode outside Sri Lanka are eligible to operate a RANSI with authorised dealers.

- Remittances by non-resident Sri Lankans in connection with this share Application Form must be made via bank drafts purchased out of funds in the RANSI. There are no exchange control restrictions on remittance of funds that may be available in a RANSI.

- Where a RANSI holder is also the holder of a Non-Resident Foreign Currency (NRFC) account, movement of funds between a RANSI and a NRFC account of the account holder is freely permitted, so long as the account holder continues to reside abroad and does not cease to be a citizen of Sri Lanka. Therefore, funds in the NRFC account could be transferred to a RANSI through which investment in shares could be made.

Cheques or bank drafts or bank guarantees should be endorsed by the issuing custodian bank, to the effect that, such payment has been made against funds available in the individual’s SIERA/FCBU account. The endorsement must be clearly indicated on the cheque or bank draft or the bank guarantee. Alternatively, a document detailing the endorsement could be submitted along with the payment and Application.

Bank drafts drawn on a RANSI account should also be endorsed in line with the above.

Applications supported by foreign currency remittances should be made in conformity with requisite declarations accompanied by the documentation stipulated by the Controller of Exchange.

5.13.5 Restrictions Applicable to Foreign Nationals Resident in Sri Lanka

Foreign nationals resident in Sri Lanka may only make payments through Sri Lanka Rupee accounts only if they possess dual citizenship where one such citizenship is Sri Lankan. Foreign nationals having Sri Lankan citizenship should attach a certified copy of the citizenship certificate with the Application Form.

Foreign nationals residing in Sri Lanka having valid residency visas should note that they may not make remittances via cheques or bank drafts or bank guarantees drawn on Sri Lanka Rupee accounts held in Sri Lanka but may do so via SIERA/FCBU account as detailed in Section 5.13.4 above. Applications made by foreign nationals not in accordance to the foregoing shall be rejected.

5.14 Banking of Payments

All cheques or bank drafts or bank guarantees received in respect of Applications will not be banked or called on until the Market Day after the Closure Date of the subscription list, in terms of CSE listing rules.

5.15 Determination of Share Offer Price

The Company in consultation with the Managers to the Offering will determine the Share Offer Price subsequent to the book building process detailed in Section 5.9 and Section 5.10 above and subject to the provisions of the paragraph below.

In order to determine the Share Offer Price, quantum of shares subscribed for at each price within the Book Build Price Range would be aggregated in descending order, starting from the highest price of the Book Build Price Range. The Share Offer Price will be the price at which the demand for the entirety of the Offered Shares is first met on a cumulative basis.



In the event of an under subscription, the Share Offer Price would be decided at the sole discretion of the Board of Directors, depending on the number of shares to be issued to the public.

In the event that the Specified Price selected by the applicant is higher than the Share Offer Price, a refund for the difference will be made.

Those applicants who have selected a Specified Price below the Share Offer Price will not be considered for allocation of Offered Shares at the outset and the cheques or bank drafts or bank guarantees would be returned by post. In the event a cheque or bank draft accompanying an Application Form with a Specified Price below the Share Offer Price was presented to the bank prior to determination of the Share Offer Price, a refund will be made in full to such applicants.

5.16 Returning of Application Monies

Where an Application Form is rejected, cheque or bank draft or bank guarantee received in respect of the Application will be returned via ordinary post at the risk of the applicant. In the case of joint applicants, application monies will be returned to the first named applicant.

Where the Application Form is accepted and the cheque or bank draft or bank guarantee is not honoured at the first presentation, the application will also be rejected and the cheque or bank draft or bank guarantee will be returned via ordinary post at the risk of the applicant. In the case of joint applicants, application monies will be returned to the first named applicant.

5.17 The Basis of Allotment

The Board of Directors of the Company will endeavour to publicise the basis of allotment within seven (07) Market Days from the Closure Date. These allotments will be made in a fair manner. The Company does not intend to make any preferential allotments.

5.18 Refunds on Applications

Where an Application is accepted only in part, the balance of the monies received on Application will be refunded.

Refund cheques on shares that have not been allotted would be posted on or before the expiry of ten (10) Market Days from the Closure Date (excluding the Closure Date) as required by the CSE listing rules. Applicants would be entitled to receive interest at the last quoted AWPLR published by the Central Bank of Sri Lanka plus a premium of 5% per annum, on any refunds not made before the expiry of the abovementioned period.

If the applicant has provided accurate and complete details of his bank account in the Application Form, the refund payment will be made to the bank account specified by the applicant through the Sri Lanka Inter Bank Payment System (SLIPS) and a payment advice shall be issued to the applicant. If the applicant has not provided details of the bank account in the Application Form or has provided inaccurate or incomplete details of the bank account, a refund payment will be made by a crossed cheque in favour of the applicant and sent by post at the risk of the applicant. In the case of a joint Application, a crossed cheque will be drawn in favour of the applicant whose name appears first in the Application Form.

Requests for cancellation of crossing on the refund cheque, in instances where the applicant does not maintain a current account, should be addressed to the Registrars to the Offering in writing, stating the cheque number and the fact that the applicant does not maintain a current account. The refund cheque and a clear photocopy of the applicant’s NIC should accompany the letter.

In the event of a cheque delivered by hand by a third party to the Registrars to the Offering for cancellation of crossing, a letter stating the NIC number of such third party authorised by the Applicant should also be presented with the cheque.



Cheques on which the crossings have been cancelled by the Registrars to the Offering should preferably be collected in person or by a third party authorised by the applicant. Where an applicant has requested the delivery of a cheque on which the crossing has been cancelled via post, the cheque will be sent at the risk of the applicant.

5.19 Successful Applicants, CDS Lodgement and Share Certificates

For successful applicants share certificates will be dispatched before the expiry of twenty five (25) Market Days from the Closure Date of the Offering as required by the CSE listing rules, via registered post to the address provided by each shareholder in their respective Applications. Where requested by a shareholder, the Offered Shares allotted will be directly uploaded to the respective CDS account given in the Application Form before the expiry of Eighteen (18) Market Days, from the Closure Date of the Offering as required by the CSE listing rules. Investors wishing to trade the Offered Shares on the CSE without delay are advised to state the CDS account number in the Application Form to facilitate direct lodgement.

A written confirmation of the allocation will be sent to the shareholder within two (02) Market Days of crediting the CDS accounts by ordinary post to the address provided by each shareholder in their respective Applications.

In terms of the CSE listing rules the Ordinary Shares of the Company may be listed upon the completion of the CDS

uploads and prior to dispatch of share certificates. Therefore, investors who wish to trade Offered Shares in the secondary market from the first day of commencement of trading are advised to request for a direct upload of shares to their CDS account by stating the CDS account number when applying for shares. In the event that the CDS account number is not stated in the Application Form, the share certificate dispatched by post may not be received by the investor before the Ordinary Shares of the Company commence trading on the CSE.

5.20 Transferability of Offered Shares

Offered Shares shall not be transferable by the shareholders during the period between the date of allotment of the Offered Shares and the date of listing of the Ordinary Shares of the Company on the CSE.

5.21 Declaration to the Colombo Stock Exchange and Secondary Market Trading

The Company will submit to the CSE a Declaration on the Market Day immediately following the day on which investors’ CDS accounts are credited with securities. Trading of Ordinary Shares of the Company on the secondary market will commence on or before the third Market Day from the receipt of the Declaration by the CSE.



6.1 History

The origin of Sri Lanka’s power sector dates back to the year 1895 with the first commercial distribution scheme being commissioned to provide electricity to consumers within a restricted area in Colombo. The management of the sector passed hands from the private sector to enhanced state ownership with the establishment of a separate department for electricity in 1926, which was later renamed the Department of Government Electrical Undertakings (DGEU). The DGEU was responsible for the generation and transmission while the local authorities and licensees were responsible for the distribution and supply.

In 1969, the functions of the DGEU were transferred to the newly established statutory body, the Ceylon Electricity Board

(CEB). Thus, CEB was entrusted with the responsibility of generation, transmission and distribution of electric power whilst some local authorities too continued to distribute power. Subsequently, the Government, recognising the inefficiencies of local authority operations, established the Lanka Electricity Company Limited (LECO) in 1983. LECO is co-owned by the Treasury of Sri Lanka, the CEB, local authorities and the Urban Development Authority. By the year 1992, the CEB had substantially completed acquisition of the remaining distribution schemes operated by the local authorities. Since its inception, LECO continued to co-operate in the electricity distribution function alongside the CEB in several parts of the island. Main regions where LECO is operational include selected areas in the outer suburbs of Colombo and selected areas in the Western and Southern parts of the island.

Although the Government has initiated private sector participation by allowing Independent Power Producers (IPPs) to participate in the generation of electricity, the transmission and distribution of electricity still remains a state-owned monopoly in Sri Lanka.

6.2 Governance and Regulation

The legal framework which regulated the electricity industry was primarily set out in the Electricity Act No. 19 of 1950 and the Ceylon Electricity Board Act No. 17 of 1969. The Minister of Power and Energy was empowered to issue licences to industry participants to supply electricity under the provisions of the said Act.

Private sector investment in the power sector, prior to 1996, was limited to a few small-scale off-grid hydro power projects. During this period, power sector development relied on budgetary allocations of the Sri Lankan Government and concessionary foreign aid from multilateral and bilateral sources. The Independent Power Producer (IPP) concept was first introduced to the country in 1996 as the CEB’s generation output had difficulty in meeting the rising demand. Thus, private sector has been participating in power generation since 1996 by setting up both small hydro and thermal power plants on Build Own Operate (BOO)/Build Operate Transfer (BOT) basis.

Further reforms in the power sector were introduced in 1998 and resulted in the passing of the Electricity Reforms Act No. 28 of 2002 and the establishment of the Public Utilities Commission of Sri Lanka (PUCSL), a regulatory body to regulate public utilities sectors such as electricity and water. The PUCSL has a wide range of regulatory powers and functions to regulate each public utilities industry within its purview, to promote competition, protect consumer interests and to resolve disputes between regulated parties. The functions, duties and powers specific to each industry of the PUCSL are provided through individual legislations, each called an “industry act”, governing specific utilities. Since its establishment in 2003, PUCSL has been engaged in the policy related activities of the power sector.

According to the Central Bank Annual Report 2008, the PUCSL was granted greater authority in the electricity sector through the new Sri Lanka Electricity Act No. 20 of 2009 (new Act) which came into effect from April 08, 2009. The new Act repealed the abovementioned Electricity Act No. 19 of 1950 and Electricity Reforms Act No. 28 of 2002. The new Act provides the basic legal framework for separation of policy, regulatory and operational aspects allowing the PUCSL to regulate the electricity sector. However, the new Act imposes certain constraints on private sector participation in key areas of operation such as generation and distribution. Therefore, either complete or partial involvement of the Government in the generation and distribution of electricity is compulsory. Under the new Act, licensing of power sector operators is now under the authority of the PUCSL. Having obtained the licence under the new Act from PUCSL, the CEB continues to function as a vertically integrated utility with powers to hold generation, transmission and distribution licences simultaneously.

6.0 THE POwER SEcTOR Of SRI lANkA


The Sustainable Energy Authority (SEA) was established in 2007 under Act No. 35 of 2007. The SEA is entrusted with achieving objectives of the National Energy Policy and Strategies of Sri Lanka. This includes ensuring energy security, increasing indigenous energy and improving energy efficiency in the country. Accordingly, all renewable energy projects to be commissioned in the country require approval from the SEA.

In addition, certain environmental regulations set out in the National Environmental Act No. 47 of 1980 applies to generation, transmission and distribution sectors of the electricity industry. Adherence to these regulations is monitored by the Central Environmental Authority on a periodic basis.

6.3 Structure of the Power Industry CEB mainly handles principal activities of generation, transmission and distribution of power in Sri Lanka with limited private

sector participation in the power generation segment.

Industry participants of the local power sector have been graphically depicted in Figure 6-1 below.

Figure 6-1 Industry Participants of the Local Power SectorSource: Based on CEB Statistical Digest 2008

Activity System Operator(s)/Participants Key Indicators

The CEB and Independent Power Producers (IPPs) participate in generation of electricity. However, the main system operator is CEB. Power generated by the IPPs is procured by CEB under Power Purchase Agreements (PPAs) signed between the parties.

CEB IPPTotal InstalledCapacity 1,758 MW 887 MW

Total UnitsGenerated 5,787 GWh 4,114 GWh

The sole participant is the CEB. Length of high voltage transmission lines: 2,112 km

Overall System Loss: 14.99%

The CEB has significant control over distribution activities.

LECO also participates in distribution activities in a limited area.

Length of low voltage distribution lines: 95,113 km

Length of medium voltage transmission lines: 24,243 km of low voltage lines

Distribution substations: 19,720

Consumers consist of domestic and religious, general and industrial.

Number of consumers: 4,088,900

Level of electrified dwelling stock: 83%

THE POwER SEcTOR Of SRI lANkA


6.3.1 Power Generation

Power generation in Sri Lanka mainly derives from hydro and thermal energy sources. The total power generated in 2008 stood at 9,901 GWh and the total installed capacity stood at 2,645 MW. As mentioned earlier, ownership within the power generation sector is still dominated by CEB holding approximately 66.5% of the total capacity whilst private power producers accounting for the remaining 33.5%.

Hydro power is the main indigenous natural resource utilised for commercial electrical energy generation in Sri Lanka. CEB’s existing power generating capacity is predominantly based on hydro power. Approximately 90% of the developed hydro capacity in the country is owned by CEB. Around 42% of the electricity consumed in the year 2008 was produced by hydro power stations in the country. The CEB hydroelectric system consists of Laxapana complex (upper reaches of Kelani River), Mahaweli complex, Samanalawewa and Kukule Ganga plants and at full capacity can supply the grid with 1,185 MW of electricity. Apart from the above, several CEB owned and privately owned small hydro power stations also contribute to the national grid totalling a capacity of approximately 170 MW. At present the SEA has granted energy permits to 40 new small hydro plants with cumulative capacity of approximately 100 MW.

However, the generation of hydroelectricity in a particular year entirely depends on the effective installed capacity and the rainfall pattern in catchment areas. Saturation of economically exploitable hydro power resources, growing environmental concerns as a result of construction of medium scale hydroelectric plants and lack of effective watershed management has resulted in the country opting for oil-fired thermal plants to meet the deficiency in supply. Nonetheless, small scale run-of-the-river hydro power projects, which are largely inclined with the preservation of the environment, have been identified to enhance the hydro power sector contribution.

During the last 15 years, inability of the CEB to gradually enhance capacity due to administrative and operational inefficiencies coupled with the difficulty in obtaining funds resulted in GoSL inviting the private sector to step into the long term power generation business. Private sector participation in electricity generation has been mainly through oil fired thermal plants. Therefore, over the past five years there has been a marked increase in thermal power installed capacity with commissioning of plants operating via varying technologies, such as medium speed engines, steam turbines, gas turbines and combined cycle. During this period, thermal capacity has recorded a 5.3% CAGR.

Present thermal power sector contributions are derived from CEB owned Kelanitissa complex, Sapugaskanda complex and a small thermal plant in Chunnakam which in total can generate 548 MW, while IPPs contribute approximately 740 MW to the national grid. The IPP generation capacity will increase by another 100 MW following the completion of the second phase of the Kerawalapitiya combined cycle power plant. In addition to the IPPs operating under long term Power Purchase Agreements (PPAs), emergency power producers are also called from time to time to meet any shortfall in power generation on a short term basis as and when the need arises.

As of 2008, the installed capacity of hydro power plants exceeds that of thermal power plants. However, in the power generation front, thermal power plants have made a higher contribution in comparison to hydro power plants. Accordingly, during 2008, 58% of the units generated have been from thermal power plants. This can be attributed to the higher Plant Load Factors (PLF) of thermal power plants in comparison to the hydro power plants which are primarily dependent on rainfall.

Apart from thermal and hydro electricity generation, a marginal amount of power is also generated through wind power via a small wind farm located in the Southern coastal district of Hambantota. This 3 MW wind farm commenced its operations in 1999 and contributed 3 GWh to the national grid in 2008.

Research study carried out by the University of Peradeniya, together with the National Science Foundation of Sri Lanka, has identified wind power as one of several prospective renewable sources for power generation in Sri Lanka. The estimated wind potential in the country according to this study is approximately 8 MW/km2 in open land area with an overall potential of



approximately 200 MW in the South-Eastern coastal area alone. As at July 31, 2009, SEA had issued two energy permits to prospective wind power plants. Both these 10 MW power plants are to be located in the country’s Western coastal Kalpitiya area.

The present national power generation structure and principal participants can be classified according to the primary source of generation as depicted below.

Figure 6-2 National Power Generation by Energy Source and ParticipantSource: Based on CEB Statistical Digest 2008 and LTGEP 2009-2022

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Tabulated below are the details of the existing hydro and thermal generation systems/power plants maintained by the CEB and the IPPs.

Table 6-1 : Current Hydro and Thermal Power Generation System

Scheme/Plant Name Ownership / Operator

Available Capacity(MW)

Expected Annual Average Energy

Generation (GWh)Hydro Electric Generation Schemes/Plants Laxapana Complex CEB 335 1,563 Mahaweli Complex CEB 660 2,258 Samanalawewa and Kukule Projects CEB 190 644 CEB Small Hydro Projects 20 Not given Private Small Hydro Projects 150 435

Thermal Power Generation Schemes/Plants Kelanitissa CEB 380 2,414 Sapugaskanda CEB 160 976 West Coast Power (Private) Limited (Yugadhanavi/Kerawalapitiya)* IPP 200 Not given

AES Kelanitissa (Private) Limited IPP 163 1,314 Heladhanavi Limited IPP 100 698 Ace Power Embilipitiya Limited IPP 100 697 Colombo Power (Private) Limited IPP 64 420 Asia Power Limited IPP 51 330 Ace Power Matara Limited IPP 25 167 Ace Power Horana Limited IPP 25 167 Lakdhanavi Limited IPP 23 156

Source: Based on CEB LTGEP 2009 - 2022 * Commissioned in 2009 The last power plant commissioned by the CEB was in July 2003. Subsequently, approximately 500 MW has been added to

the national grid through thermal IPPs. Change in capacity available by ownership throughout the past decade is graphically depicted in Figure 6-3. As evident from this graph, the capacity enhancement by CEB in both hydro and thermal power generation during the past decade has been marginal. Presently, CEB has undertaken the construction of the Upper Kotmale hydro power plant and Norocholai coal power plant. Both these plants are scheduled to be completed by 2011.



The new capacity additions to the national grid from private producers have mainly been through thermal sources. As a result the mix between thermal and hydro power generation has traded predominance over the past ten years as presented in Figure 6-4 below. As at the end of year 2008, the contribution from the private sector towards the total power generation has been approximately 41.5%, compared to 8.5% in 1999.

Figure 6-3 Ownership Structure of Capacity AvailabilitySource: Based on CBSL Annual Report 2008

*Wind power generation throughout the above period has been within the range of 2 GWh – 4 GWh

Figure 6-4 Units Generated by SourceSource: Based on CBSL Annual Report 2008

6.3.2 Transmission and Distribution

The power transmission network commonly known as “the grid” is used for the transmission of electricity in bulk. The electricity generated in Sri Lanka is transmitted at high voltages of 220 kV and 132 kV across the country by way of transmission lines and as at 2008 the length of these transmission lines stood at 2,112 km. The electricity generated at relatively low/medium voltages is stepped up to higher voltages mentioned above at grid substations for the purpose of transmission. By the end of 2008, there were 53 grid substations in the country with a combined capacity of 5,804 MVA. All substations and transmission lines are owned and operated by the CEB.



Geographic dispersion of power stations and transmission lines within Sri Lanka are given below.

Figure 6-5 Geographical Dispersion of Power Stations Within Sri LankaSource: Based on CEB Statistical Digest 2008


Power Station132kV G/S220/132kV G/S132kV Line220kV LineNot Operative

a Bowatennab Ukuwelac Kotmaled Victoriae Randenigalaf Rantembeg Inginiyagalah Polpitiyai Laxapanaj New Laxapanak Canyonl Samanalawewam Udawalawen Nilambeo Wimalasurendrap Kukuleq Chunnakamr Kelanitissa C.Cy. (Steam/GT)s Sapugaskandat Wind

u Koolair-KKSv Asia Powerw Lakdhanavix Barge Mt.y ACE- Mataraz ACE- HoranaA AES - KPS C.Cy. (Steam/GT)B HeladhanaviC ACE - EmbilipitiyaD Yugadhanavi C.Cy


The electricity transmitted at high level voltages is stepped down to medium level voltages of 33 kV and 11 kV. The length of these medium voltage distribution lines stood at 24,243 km as at the end of year 2008. The medium voltage distribution lines terminate at distribution substations where the voltage is stepped down to local distribution levels of 415/230 V. As of 2008, the number of distribution substations stood at 19,720 and the combined capacity was 4,616 MVA. Domestic users receive electricity at these low voltages where the distribution is carried out by either CEB or LECO. CEB handles approximately 86% of sales in Sri Lanka while LECO accounts for the remainder. Total low voltage circuit length of the overhead and underground distribution lines is estimated to be approximately 95,000 km. At present, CEB and LECO collectively operate and maintain this distribution system.

Given in Figure 6-6 below is the process flow diagram of the various phases of transmission of power from generation to distribution.

Figure 6-6 Various Phases of Transmission from Generation to DistributionSource: Based on data from CEB

6.4 Electricity Demand Dynamics

6.4.1 Electricity Demand

The per capita consumption of electricity in Sri Lanka is lower in comparison to other major economic players in the South Asian region. The following chart compares per capita electricity consumption in various developed and developing countries including countries in the region.

Figure 6-7 Electricity Consumption Per Capita Source: Based on UNDP Human Development Report 2007-2008



Sri Lanka’s electricity demand has been growing at a CAGR of 6.0% in the past five years. Although growth in electricity consumption has been much higher in previous years, in 2008 the growth plummeted to approximately 0.9% mainly due to consumer tariff increases and lower growth in energy intensive sectors of the economy.

Electricity demand growth has shown a direct correlation with the growth of the country’s economy in the past. As of late, momentum of electricity demand growth has not kept pace with the growth of the economy as depicted in Figure 6-8 below. This variation is widely regarded to be a result of a contraction in the energy intensive industrial sectors compared to the other sectors in the economy. However, this trend is expected to change in the future with the country’s three decade long civil war coming to an end and large scale development projects expected to take-off in the North and East.

Figure 6-8 GDP and Electricity Demand Growth PatternsSource: Based on CBSL Annual Report 2008

6.4.2 Sectoral Electricity Demand Sale of electricity is categorised into four sectors of the economy namely industrial, general, domestic and religious and

other. The electricity consumption of the industrial sector superseded the domestic and religious sector until 2006. However, consumption patterns appear to have changed since 2006 with the domestic and religious sector becoming the largest electricity consumer in the country. Domestic and religious sector accounted for 33.3% of the total electricity consumption in 2008, closely followed by industrial sector accounting for 31.8%. Household electricity consumption has risen steadily with macro economic development and exponential growth in the number of households connected to the national grid (electrification level).

In 1998, the countrywide electrification level stood approximately at 53% with a large percentage of rural households not being connected to the national grid. By 2008, this had risen to 83% and has been driven mainly by the successful implementation of rural electrification schemes, six of which have been completed in 2008 at an estimated cost of USD 189 Million. Planned rural electrification projects are expected to increase the households connected to the national grid to 86% by 2010 extending an opportunity for increased private sector participation in power generation.



The trend in distribution of electricity consumption by tariff category during the past ten years up to year 2008 is shown in Figure 6-9 below.

Peak demand in electricity during the past five years has been on the rise year-on-year with a CAGR of 5.3%. Nevertheless, this demand has been met by enhancement in installed capacity throughout the period. The increasing trend in peak demand is likely to continue in the same direction with the economic and social development activities expected in rural areas, especially in the North and East.

Figure 6-9 Electricity Consumption by SectorSource: Based on CBSL Annual Report 2008

Figure 6-10 Peak Demand and Installed CapacitySource: Based on CEB LTGEP 2009 – 2022 and Statistical Digest 2008



6.5 Future Outlook

The new Sri Lanka Electricity Act No. 20 of 2009 passed in April 2009 operates as a stepping stone to future restructuring of the industry. The establishment of the PUCSL as an independent regulatory agency to regulate the power sector is an indication of reforms gaining momentum. It should be also noted that the election manifesto of the incumbent Government has also given consideration to the need to strengthen country’s power sector to meet future demand.

Reforms are not viewed positively by all factions of the economy, although the reforms are justifiable in the present operational environment burdened by rising energy costs, high electricity tariffs and lower efficiency levels. Furthermore, the demand for electricity continues to rise and is expected to grow at a more rapid pace following the end of the three decade long civil war in the North and East. The Long Term Generation Expansion Plan (LTGEP) 2009 – 2022 published by CEB projects the electricity demand and generation in Sri Lanka to increase at a CAGR of 8.6% and 8.4% respectively from 2009 to 2022. This growth in demand is projected based on forecast economic growth taking into account the increase in industrial sector electricity consumption, rise in the number of electrified households and demand increases of each individual household with improving disposable incomes. Accordingly, the power sector is required to generate an additional output of 22,478 GWh by the year 2022. Based on the Plant Load Factor of 58.6% achieved in 2008, this additional generation requirement translates into approximately, 4,380 MW additional capacity.

Figure 6-11 Forecast DemandSource: Based on CEB LTGEP 2009 - 2022

The CEB has identified the following projects to be added to the national grid in future. Three of these projects are already under construction and are expected to be connected to the grid by 2011. Details of the identified power projects are tabulated below.

Table 6-2 : Proposed Power Generation Project Schedule

Proposed Power Project Capacity Expected Completion PeriodKerawalapitiya combined cycle plant – Phase II 100 MW 2009Norochcholai coal power plant – Phase I 300 MW 2011Norochcholai coal power plant – Phase II & III 600 MW Not yet finalisedUpper Kothmale hydro power plant 150 MW 2011Trincomalee coal power plant 1,000 MW Identified for implementationUma Oya 120 MW - do -Ginganga 49 MW - do -Broadland 35 MW - do -Morogolla 27 MW - do -Source: Based on CBSL Annual Report 2008



Although the construction of the Norochcholai coal power plant is not aligned with the global trend of opting for cleaner technologies, this plant is expected to provide a much needed low cost source of power generation and would enable a reduction in the country’s overall cost of energy. Taking into consideration the relatively low cost of coal power, the second plant with a capacity of 1,000 MW is proposed to be constructed in Trincomalee. However, the total addition to the grid from the identified power projects as per the LTGEP and CBSL Annual Report 2008 is calculated at 2,381 MW. Provided all identified projects in the LTGEP are implemented, the additional installed capacity required by 2022 at the average plant load factor of current plants lags by approximately 2,000 MW. It can be reasonably assumed that at least part of this additional requirement of generation capacity would be met with private sector participation.

Focus on Non-Conventional Renewable Energy (NCRE) sources such as small scale hydropower, wind and biomass appear to be on the rise with wider awareness on minimisation of country’s carbon foot print and the intention to reduce dependence on imported fuel based power plants. Even though the potential for medium scale hydro power projects is limited due to environmental constraints, opportunities for small scale hydro power projects, wind power plants and biomass plants are considerable. At present, the entirety of power generated by grid connected NCRE power plants is purchased by the CEB under Standardised Power Purchase Agreements (SPPA). However, electricity supply from NCRE based power plants is intermittent as those plants can only operate when the input sources such as rainfall and wind are available. Therefore, the inclination towards the development of NCRE power generation is required to be complemented with coal, oil or gas based power plants for long term sustainability.

The availability of multilateral donor based and local bank based low cost funding such as the Renewable Energy for Rural Economic Development (RERED) programme of the World Bank, has enhanced private sector interest in the renewable energy sector. Further, initiatives by the GoSL through the SEA and other organisations have taken measures to promote renewable energy based electricity generation in the country. The GoSL also plans to set up a special “Energy Fund” through funding from an energy cess and donor funding, to provide incentives for the promotion of NCRE technologies and strengthen the transmission network to absorb the NCRE technologies to the national grid. In line with this, GoSL has recently obtained a long term loan of USD 160 Million from the Asian Development Bank to support energy efficiency improvements, develop the use of renewable energy and increase connections and services to rural households. According to the National Energy Policy of Sri Lanka (NEPSL), power generation through NCRE sources is expected to add 10% to the national grid by 2015. Tabulated below is the actual and projected electrical energy supply to the grid with projections extracted from the NEPSL.

Table 6-3 : Electrical Energy Supplied to the Grid as a Share of the Total

Year Conventional Hydroelectric Maximum from Oil Coal Minimum from NCRE

2005 (Actual) 36% 61% - 3%2008 (Actual) 38% 58% - 4%

2015 (Projected) 28% 8% 54% 10% Source: Based on National Energy Policy and Strategies of Sri Lanka 2006 and CEB Statistical Digest 2005 & 2008

The number of energy permits issued by the SEA for each type of NCRE source is provided in Table 6-4. The economically viable sites for such development in the small hydro sector are fast depleting. However, NCRE sources such as wind and biomass are less exploited and offer vast potential for future development.



Table 6-4 : NCRE Projects with Energy Permits

Non Renewable Source Number of ProjectsSmall Hydro 40Wind 2Dendro 1Agricultural Residue 1

Source: Based on Sustainable Energy Authority

Impetus for rural electrification and network expansions continue with the availability of funding from multilateral agencies and identification of the necessity of power to develop the rural economies. The GoSL attaches great emphasis on rural electrification with the objective to achieve an electrification level of 86% by the year 2010. Recently, GoSL has come into agreement with a private Iranian company for the supply of electricity to 180,000 rural village households at an estimated cost of USD 106 Million. Furthermore, in line with the NEPSL, a special fund is planned to be created for the purpose of funding the Rural Electrification Programmes, where all donor funds, Government contributions and contributions from future electricity distribution utilities (as would be decided by the PUCSL) will be directed to this fund to be used for such programmes.



7.0 buSINESS OPERATIONS Of HEmAS POwER gROuP

7.1 Overview

The Private Power Projects branch of the Ceylon Electricity Board (CEB) was established in 1995 with the objective of handling private sector participation in power generation at the least-economic-cost to Sri Lanka (presently these activities are conducted by CEB’s Energy Purchases branch). Lakdhanavi Limited was the first Independent Power Producer (IPP) in the country with its first thermal power plant commissioned in November 1997. Approximately 83% of the total private sector power generation capacity is from thermal power plants and the rest is from small hydro power plants and other NCRE sources. According to the Annual Reports of the Central Bank of Sri Lanka (CBSL) published in the years 2007 and 2008, presently there are more than ten IPPs operating thermal power plants in Sri Lanka with an aggregate capacity of around 740 MW and around 60 small hydro power plants producing around 150 MW of power.

7.2 Hemas Power Limited

Hemas Power Limited (previously “Hemas Power (Private) Limited” and hereinafter referred to as “the Company” or “HMP”) incorporated in June 2003, was setup by Hemas Holdings PLC as a strategic investment company. HMP, functions as the holding company (refer Figure 7-1) for the power sector of the Hemas Group. At present, HMP owns 47.06% stake in the total ordinary shares (50% of the ordinary voting shares) of Heladhanavi Limited, an IPP operating a thermal power plant in the Western coast of the country. HMP also fully owns two companies setup to develop Small Hydro Power Plants (SHPs). First SHP out of this, located in Giddawa in the District of Kandy, was commissioned in October 2008. Second SHP in Magal Ganga-Upper Section is currently in the preliminary stage of development.

The following diagram depicts the holdings of HMP in the ordinary voting shares of its joint venture and subsidiaries.

* HMP’s investment in Heladhanavi comprises 50% of ordinary voting shares. Heladhanavi also has ordinary non-voting shares in issue. HMP does not own any ordinary non-voting shares of Heladhanavi. In terms of total ordinary shares (both voting and non-voting) HMP’s stake in Heladhanavi is 47.06%.

Figure 7-1 Shareholding Structure of Hemas Power Group


7.3 Heladhanavi Limited – Thermal Power Plant

7.3.1 Background

The thermal power plant owned by Heladhanavi Limited (hereinafter referred to as “Heladhanavi”) is located 140km away from Colombo, in the outskirts of Puttalam. This company is a joint venture between HMP and Lakdhanavi Limited (hereinafter referred to as “Lakdhanavi”) and is operated and maintained by the latter. The 100 MW power plant was commissioned in September 2004 at a cost of USD 62 Million and was designated a baseload plant1 supplying electricity exclusively to CEB. Hence, it has a plant utilisation of more than 80%. This plant was setup on a Build Own Operate (BOO) basis under a ten year Power Purchase Agreement (PPA) with the CEB and is obligated to generate and feed the Integrated Electricity Distribution Grid (national grid) a Minimum Guaranteed Energy Amount (MGEA) of 698 GWh on an annual basis.

Heavy Furnace Oil (HFO) which is the main fuel source for the power plant is supplied by the Ceylon Petroleum Corporation (CPC) under a ten-year Fuel Supply Agreement (FSA). Operations and Maintenance (O&M) of the power plant plays a critical role in Heladhanavi’s ability to generate the required energy output. Lakdhanavi Limited, the O&M operator of Heladhanavi, has many years of expertise in the field of operating thermal power plants. Under the O&M agreement, Lakdhanavi is obliged to provide all day-to-day operation and maintenance services for the facility including any modifications and repairs where necessary in all material respects in a prudent and efficient manner. The comprehensively planned preventive maintenance is carried out to keep the unscheduled downtime at a minimum level. Heladhanavi has delivered over and above the requirement of the CEB except in 2006, the second operational year of the plant. The reason for the shortfall in 2006 was attributed to the significant delays in payments by CEB resulting in Heladhanavi exhausting all lines of credit to purchase fuel.

7.3.2 Salient Features of the Tariff Structure

As per the PPA, the tariff consists of two main components, namely the Capacity Charge and the Energy Charge. The Capacity Charge comprises of an Escalable component and a Non-Escalable component. The Non-Escalable component reflects, in part, the debt servicing obligations, servicing shareholders via dividends/returns and insurance payments of Heladhanavi. This component is quoted in US Dollars and paid in SL Rupees at spot conversion rate. The Escalable component of the Capacity Charge, which is also quoted in US Dollars and paid in SL Rupees on the same aforesaid basis, is adjusted every six months inline with the United States Consumer Price Index (USCPI) and is paid to cover all administration costs, fixed O&M costs and related expenses. CEB is required to pay Heladhanavi the full amount of the Capacity Charge payable based on MGEA notwithstanding the occurrence of force majeure affecting CEB. Therefore, 1/12th of the Capacity Charge is paid monthly by the CEB. Within thirty days from the end of each year, Heladhanavi reconciles the actual energy produced with the MGEA and other contractual obligations and in the event any shortfall exists, Heladhanavi is required to pay liquidated damages to the CEB based on percentages as set out in the PPA.

The Energy Charge is the component of the tariff which is paid according to the number of units produced/metered each month. The Energy Charge comprises of a Non-Fuel Component, quoted in US Dollars and paid in SL Rupees, which includes the variable O&M costs and a Fuel Component, paid in SL Rupees, which covers the expenses for fuel and fuel transportation. All US Dollar components which are paid in SL Rupees are immediately converted into US Dollars upon receipt of payment from CEB.

7.3.3 Technology and Process

The 100 MW Heladhanavi thermal power plant utilises six 18V46 Wärtsilä two stroke medium speed engines which are rated at a maximum capacity of 17,550 kW each. These engines use HFO (180cSt at 50˚C and Auto Diesel) as its fuel source. Twenty four hour operation of the plant requires approximately 500,000 litres of HFO and the main storage tanks hold fuel adequate for 14 days. The HFO is heated before being pumped into the engines using auxiliary boilers and by circulating through the headers of the high temperature cooling water lines. The fuel is injected to the combustion chamber which has compressed air

1 A baseload plant is a power plant which functions throughout the day only interrupting operations for maintenance and at times when the generation of the same is not required by CEB due to various reasons.

buSINESS OPERATIONS Of HEmAS POwER gROuP


of high temperature that causes it to ignite. The pressure created by the combustion inside the cylinders, causes the pistons which are at the end of the compression stroke to rapidly move in the opposite direction with the combustion stroke. The pistons are connected to the crank shafts of the engines which are coupled with ABB generators that produce the required electricity. The electricity generated is fed to the national grid at the Kalladi grid sub-station, stepped up to 132kV for the purpose of transmission. A schematic diagram of the operations of Heladhanavi Thermal Power Plant is given below:

7.3.4 Environmental Factors

The Heladhanavi power plant was established consequent to an Environmental Impact Assessment (EIA). The power plant strictly conforms to conditions stipulated in the Environmental Protection Licence accorded by the North Western Province Environmental Authority in all fronts including emissions, noise, etc. In addition, an annual environmental assessment is carried out by the North Western Province Environmental Authority for the renewal of the Environmental License. Adequate measures have been taken within the vicinity of the power plant to control noise impacts to the environment by closely monitoring the noise levels at demarcated areas in the premises. Additionally, an independent third party assessment is taken twice a year to assess the noise level. Conservation of water is done through rain water harvesting lakes built and maintained in the power plant premises. The water used for cooling of engines and other equipment is treated in order to separate the heavy oil components mixed with water before releasing it to the open environment.

7.4 Giddawa Hydro Power (Private) Limited – Giddawa SHP

7.4.1 Background

HMP connected its first small hydro power plant situated at Giddawa, Teldeniya in the Kandy District to the national grid in October 2008. This 2 MW small hydro power plant which is fed by the river Hulu Ganga is having an expected annual energy output of approximately 8.0 Million kWh. Similar to all other grid connected SHPs, Giddawa SHP too supplies electricity to CEB (national grid) under a Standardised Power Purchase Agreement (SPPA) (entered into on May 8, 2006) with a tenure of fifteen years from the date of commencing commercial operations. HMP acquired Giddawa Hydro Power (Private) Limited (Giddawa), in September 2006 when the project development work has just begun. The operations and maintenance of the SHP is carried out by the experienced staff employed by Giddawa SHP. The fulltime staff is headed by an experienced Plant Supervisor. Daily performance of the plant is monitored through regular reporting on performance. Monthly board/review meetings are also held to ensure the smooth functioning of the plant.

Figure 7-2 Process Flow Diagram of Heladhanavi Operations



Rainfall and the resulting waterflow are the most important variables of a hydro power project. Hydrology study carried out based on 25 years of rainfall data from 1955 to 1979 at Atakolawatta Estate in the upper catchment area reports an average annual rainfall of 3,398mm. This data has been made use of to simulate the expected waterflow at the diversion weir of Giddawa SHP. At this weir diversion point the catchment area has been estimated at 113 Sq.km. Although in some years, the actual rainfall may be much lesser than the estimated average, leading to a shortfall in energy generation, in the long run, Giddawa SHP is expected to meet its expected power generation target.


The tariff applicable to SPPAs entered into prior to 2007 is computed based on avoided-cost principle and is published annually. The avoided cost means the saving derived from generation of a hydro-electric unit avoiding an electricity unit being generated from an oil-fired power plant. The avoided-cost-tariff is also classified into dry season (February-April) and wet season (May-January) tariff. The minimum tariff applicable under avoided-cost-tariff is fixed at 90% of the tariff applicable in the year in which the SPPA is entered into.

Giddawa SHP entered into its SPPA in 2006 when the avoided-cost-tariff stood at Rs. 6.73 for the dry season and Rs. 5.82 for the wet season. Therefore, the tariff applicable to electricity generation of Giddawa SHP in 2009 is the announced tariff for 2009 which stands at Rs. 11.17 for the dry season and Rs. 10.59 for the wet season. Whereas in the event if the tariff is revised downwards, the minimum tariff applicable should be not less than 90% of the 2006 tariff.


The Giddawa SHP is constructed based on the “run-of-the-river” design principle which is considered to be more environmentally friendly due to the absence of a large hydroelectric dam for the retention of water. The main infrastructure for Giddawa SHP is located on a land extent of 1.63 ha and generates a maximum output of 1,950 kW of electricity. The flow from the river is diverted using the intake weir (refer Figure 7-3) and the water is brought to the forebay tank through the head race channel. The water from the forebay tank flows down the penstock and divides into two pipelines in order to feed the two Vertical Francis Turbines, manufactured by WKV (Wasserkraft Volk AG) of Germany, located in the Power House. The two turbines drive two 400V synchronous electric generators. The output voltage of the generators is stepped up to 33 kV using the two 1300 kVA transformers and is connected to the national grid at the Gatambe substation. The expended water is then discharged back to the river through the tail race channel.

Figure 7-3 Profile of a Small Hydro Power Plant



7.4.4 Environmental Factors

Giddawa SHP was established consequent to an Initial Environmental Examination (IEE). Giddawa SHP strictly conforms to conditions stipulated in the Environmental Approval accorded by the Central Environmental Authority (CEA) in all fronts. Giddawa SHP ensures that the minimum residual flow in the river is maintained throughout.

7.5 Okanda Power Grid (Private) Limited – Magal Ganga SHP

7.5.1 Background

HMP acquired its second small hydro project Okanda Power Grid (Private) Limited (Magal Ganga SHP) in 2008. The plant is to be located at Dikellakanda in the Kegalle District on the upper section of Magal Ganga (an upper tributary of the Kelani river) and was originally estimated to operate at 1.18 MW capacity. Magal Ganga SHP at present possesses all the requisite approvals to develop and operate the plant at 1.18 MW capacity. However, upon detailed studies carried out by Magal Ganga SHP subsequent to the acquisition it was revealed that the location has potential to develop a 2.4 MW plant. Accordingly, both CEB and SEA have accorded approvals to develop and operate the plant at 2.4 MW capacity. Approval from the CEA for the capacity increase is also being sought at present. The initial site development is already being carried out and the construction of the plant is expected to commence later during the year 2009.

The hydro catchment area for Magal Ganga SHP is covered by dense virgin forest. The Maliboda rain gauge station located near the Magal Ganga SHP catchment, reports an average annual rainfall of 4,545 mm. This average annual rainfall has been derived from the daily records for a period of 20 years from 1984 to 2003. This data has been made use of to simulate the expected waterflow at the diversion weir of Magal Ganga SHP.


Magal Ganga SHP plans to enter into an SPPA upon receiving the Energy Permit from the SEA which would be valid for a period of twenty years. All SPPAs of SHPs signed after 2007 operates under newly introduced Non Conventional Renewable Energy (NCRE) tariff system. NCRE tariff operates on the cost-based principle. Cost-based principle, as opposed to avoided-cost principle, recognises the cost of developing and operating a NCRE project. Hence, the tariff considers a variety of relevant parameters, such as capital cost, capital structure, cost of capital and cost of operations and maintenance. This tariff structure gives a more certainty to the future cash flows of projects unlike the avoided-cost tariff, which largely depends on the fuel prices and exchange rates. This introduction is widely viewed as a positive step taken towards the development of the NCRE sector. Cost-based tariff is announced every year, which will be the tariff applicable to SPPAs signed in that particular year. The tariff is set as either a fixed tariff for 20 years or as a tiered tariff. The tiered tariff system currently operates with three tiers. The first tier represents years one to eight, the second tier represents years nine to fifteen and the third tier represents years sixteen to twenty. This three tier tariff also consists of an Escalable O&M Component (ECOM) and a Non-Escalable Component (NEC). If a SHP opts to operate under fixed tariff, the applicable tariff will remain unchanged for the 20 year tenure of the SPPA.

Under three tier tariff, ECOM is subject to an annual revision based on the changes in Sri Lanka Consumer Price Index (SLCPI) and the exchange rate between Sri Lanka Rupee and the US Dollar whereas the NEC component will remain unchanged during first two tiers at the price set for each tier. On the third tier NEC would be replaced by an Escalable Component (EC) and CEB would be required to pay 10% of the tariff as royalty directly to the GoSL. The escalation rate applicable for the EC would be 2/3rd of the applicable escalation rate for ECOM. As per the NCRE tariff announcement for 2009, the NEC rate for tier 1 and tier 2 is stated at Rs. 14.18 and Rs. 5.16 respectively. The base rates for ECOM and EC stood at Rs. 1.55 and Rs. 1.62 respectively.


The Magal Ganga SHP will be developed on the same fundamental “run-of-the-river” principle as the Giddawa SHP. The power generation process of Magal Ganga SHP is very similar to that of Giddawa SHP (refer Figure 7-3 above).



7.5.4 Environmental Impact

Magal Ganga SHP currently possesses the approval from CEA and other relevant authorities for the construction and operations of the plant at 1.18 MW. As previously mentioned, CEA’s concurrence has been sought for the proposed capacity increase. As a socially responsible company, HMP strictly conforms to the rules and guidelines of the CEA and other relevant authorities in developing projects. Therefore, in developing the Magal Ganga SHP, HMP will endeavour to take all necessary steps required to mitigate the impact to the environment to the maximum extent possible under the guidance and advice of the CEA.

7.6 Future Direction, Prospects and Plans As mentioned earlier, the HMP Group is currently engaged in power generation business with investments in a 2 MW hydro

power plant in Giddawa and a 100 MW thermal power plant (Heladanavi) in Puttalam. Giddawa SHP under its SPPA is set to be operational for a minimum period of fifteen years starting October 2008 (not considering any extension of tenure thereof), whereas Heladhanavi Limited operates under a PPA that expires in December 2014. The CEB is not obliged to award any extension to the PPA. However, as depicted in Table 7-1 below, it is observed that Heladhanavi at present is the lowest cost IPP for CEB. Provided that Heladhanavi maintains its low cost profile in an environment where the country’s electricity demand is growing, continuing Heladhanavi’s operations beyond the term of its current PPA may provide an economical proposition for the CEB. Hence, there is a reasonable probability that Heladhanavi plant may operate beyond the tenure of its current PPA. In such an event, terms and conditions of operating beyond December 2014 would probably be renegotiated. The Company having acquired Okanda Power Grid (Private) Limited with the right to develop the Magal Ganga SHP is now awaiting CEA concurrence to start construction of the project at a capacity of 2.4 MW. The National Energy Policy and Strategies of Sri Lanka (Issued in October 2006) promote the use of economically viable, environmentally friendly, non conventional renewable energy resources for power generation. Hence, opportunities for NCRE projects such as small scale hydro, wind, biomass and agricultural residue are likely to increase in the future. HMP intends to capitalise on such opportunities as and when they become available. The Company also intends to broaden its investment horizon beyond Sri Lanka by exploring suitable small hydro power opportunities overseas.

Table 7-1 : Average Unit Cost of IPPs

Name of IPPAverage Cost Per Unit (Rs.)

2008 2007 2006 2005Asia Power 19.75 15.64 13.00 10.28Lakdhanavi 19.29 15.70 13.07 9.37Colombo Power 19.79 14.87 11.91 9.43ACE - Matara 19.74 16.39 13.60 10.40ACE - Horana 19.32 16.04 13.07 9.94ACE - Embilipitiya 18.70 14.87 11.62 9.04Heladhanavi 16.80 12.91 10.60 7.98AES - Kelanitissa 23.33 17.32 15.78 12.77Aggreko - Chunnakam 34.07 26.53 22.31 19.81West Coast Power 33.94 n/a n/a n/a

Source: Based on CEB Statistical Digests 2005 - 2008 Notwithstanding its renewable energy focus, HMP does not exclude itself from exploring any opportunities in thermal power

generation. GoSL from time to time have called for bids to develop and operate thermal power plants and HMP would participate in those opportunities as appropriate.

Further, the Company has development, engineering and project management capabilities for hydro power projects. HMP intends to leverage these skills in future projects such that its strengths can be matched with the arising opportunities.



7.6.1 Major Assumptions on Future Plans of the Company

HMP expects the macroeconomic environment to perform positively despite a likely initial slowdown in 2009, thus supporting strategic investments within the country.

Electricity demand is expected to rise in the future through higher disposable income and enhancement in living conditions of existing users and with the addition of new customers.

Private sector participation is both sought and encouraged by the GoSL, in various power generation spheres especially in the non-conventional renewable sector.

7.7 Statutory Information Pertaining to the Company

7.7.1 BOI Status and Tax Position

Hemas Power Limited

As per the section 21(H) of the Inland Revenue Act No. 38 of 2000 as amended by Act No. 37 of 2003 and Act No. 10 of 2006, HMP is classified as a venture capital company. Accordingly, HMP enjoyed a five (05) year tax exemption period from the year of assessment 2003/04 to 2007/08. However, after expiration of the aforesaid tax exemption period the Company is liable for income tax at the rate of twenty per centum (20%) as per the Part ‘A’ of the Second Schedule of the Inland Revenue Act No. 10 of 2006.

Heladhanavi Limited

Heladhanavi Limited has entered into an agreement with the Board of Investment (BOI) on August 28, 2003, which conferred the following benefits under section 17(2) of the Board of Investment of Sri Lanka Law No.4 of 1978.

A tax holiday of ten (10) years with the import of project related capital items being exempt of any custom duty.

After the expiration of the tax exemption period, a concessionary corporate tax rate of fifteen per centum (15%) to be charged on profits of the organisation.

Interest income of Heladhanavi from FCBU sources is exempted from income tax and interest income on delayed CEB payments is considered a business income and therefore is exempted from income tax during the period of the tax holiday.

Giddawa Hydro Power (Private) Limited

Giddawa Hydro Power (Private) Limited has entered into an agreement with the BOI on March 30, 2007, which conferred the following benefits under section 17 of the Board of Investment of Sri Lanka Law No. 4 of 1978.

A tax holiday of five (05) years reckoned from the year of assessment as may be determined by the BOI, in which the company commences to make profits or any year of assessment not later than two (02) years from the date of commencement of commercial operations of the company, which ever is earlier. As such, Giddawa Hydro Power (Private) Limited commenced commercial operation and made profits in 2008/09.

A concessionary tax rate of ten per centum (10%) for the two (02) years following the end of the tax exempt period.

After the expiration of the period the aforesaid concessionary tax rate is applicable for the profits of the entity and shall be charged at a corporate tax rate of twenty per centum (20%).

Interest income of Giddawa SHP is liable at the tax rate of thirty five per centum (35%).



Okanda Power Grid (Private) Limited

At present, Magal Ganga SHP has not received BOI status. However, HMP is of the view that Magal Ganga SHP would be granted BOI status with similar terms as Giddawa SHP in due course.

7.7.2 Degree of Dependence on Key Customers and Suppliers

Customers

Entirety of HMP Group revenue is generated through the sale of electricity to the CEB. Heladhanavi thermal power plant operates under a PPA for a tenure of 10 years while Giddawa SHP operates under a SPPA with a tenure of 15 years. In addition, the Company has obtained the requisite approvals (except for CEA clearance for the increase in capacity) to enter into the SPPA for Magal Ganga SHP with a tenure of 20 years. As depicted in Section 7.6, Heladhanavi accounts for the lowest average cost of generating electricity compared to other oil fired thermal power plants. Hence, there is a reasonable probability that the CEB may continue procuring electricity from the Heladhanavi plant after the expiration of the PPA provided that it could remain a comparatively cheaper electricity generation plant beyond the term of its PPA.

Also, small hydro power projects have minimal generation cost and are of lesser impact to the environment compared to large and medium scale hydro projects. HMP owned SHPs are unlikely to witness any curtailment of supply in the future as CEB is obliged to purchase the entirety of the electricity generation from SHPs under the SPPAs.

Heladhanavi Limited has also signed an Implementation Agreement with the GoSL. This agreement confirms claim over the obligations of the CEB under the PPA as the electricity buyer and Ceylon Petroleum Corporation (CPC) under the fuel supply agreement as the supplier of fuel. Therefore, Implementation Agreement provides a cushion over a default by the CEB or CPC.

Suppliers

Heladhanavi thermal power plant uses HFO as its main raw material. For the supply of HFO and other fuel needs, Heladhanavi has entered into a Fuel Supply Agreement (FSA) with the CPC. Under this contract, the CPC is obliged to supply fuel over the tenure of the PPA. The HFO is transported to the plant at Puttalam via bowsers and for this purpose, Heladhanavi has entered into a Fuel Transport Agreement with LTL Projects (Private) Limited.

In addition, Heladhanavi Limited has entered into an agreement with Lakdhanavi Limited for Operation and Maintenance (O&M) of the power plant. Under this agreement daily operations and maintenance services of the facility are carried out by the latter. For the services provided by Lakdhanavi Limited an operating fee is paid. This fee comprises a fixed and a variable component.

Giddawa SHP is not highly dependent on any individual supplier for its business operations apart from the electromechanical and spare part suppliers, should the need arise.



7.7.3 Group Investment Structure

A graphical representation of Group shareholding structure is depicted in Section 7.2 (Figure 7-1). HMP’s ownership in ordinary voting shares of joint venture and subsidiaries as at July 31, 2009 is depicted below.

Table 7-2 : Ordinary Voting Share Ownership of HMP in Joint Venture and Subsidiaries as at July 31, 2009

Company No of OrdinaryVoting Shares

Investment Value(Rs.)

Holding by HMP (% )

Giddawa Hydro Power (Private) Limited 1,630,999 163,099,900 100%Okanda Power Grid (Private) Limited 662,513 22,612,710 100%Heladhanavi Limited (Note I) 60,000,000 600,000,000 50%

Note I: HMP’s investment in Heladhanavi comprises 50% of ordinary voting shares. In terms of total ordinary shares (both

voting and non-voting) HMP’s stake in Heladhanavi is 47.06%. Capital Structure of joint venture and subsidiaries as at July 31, 2009 is depicted below.

Table 7-3 : Capital Structure of Joint Venture and Subsidiaries as at July 31, 2009

Company OrdinaryVoting Shares

OrdinaryNon-voting Shares

Preference Shares

Giddawa Hydro Power (Private) Limited 1,630,999 - 2,260,000*Okanda Power Grid (Private) Limited 662,513 - -Heladhanavi Limited 120,000,007 7,500,000 6,666,667

* HMP holds 1,450,000, cumulative redeemable non-voting preference shares of Giddawa SHP.

HMP does not own any other shares in its joint venture and subsidiaries other than disclosed above.

7.7.4 Dividend Policy

The declaration and payment of dividends on Ordinary Shares will be recommended by the Board of Directors and approved by the shareholders of the Company. The dividend policy will be based on a number of factors, including but not limited to the Company’s earnings, capital requirements and overall financial condition. Dividend payments from Heladhanavi Limited are restricted by covenants imposed through the Loan Syndication Agreement. However, the loan pertaining to this agreement is expected to be fully repaid by Financial Year 2010/11.

An extract of the loan syndication agreement dated September 23, 2003 of Heladhanavi Limited is given below: 12.6 Undertaking not to declare dividends The Borrower agrees and undertakes not to declare any dividend without the prior consent of the Lead Bank:- 12.6.1. during the Grace Period; and 12.6.2. thereafter 12.6.2.1. If there has occurred any Event of Default

12.6.2.2. in any event without furnishing to the Lead Bank at least thirty (30) days prior to the date of declaring such dividend a certificate from, the Auditors of the Borrower certifying that the Borrower has sufficient funds to meet its repayment commitments and obligation under this Agreement and all Related Documents for a period of at least three months after the date of payment of such dividend.



Please refer Section 12.2 of this Prospectus for details on inspection of documents.

Table 7-4 : Dividend Payments of HMP

Year FY2008/09(Rs.)

FY2007/08(Rs.)

FY2006/07(Rs.)

Dividends Paid 101,647,060 89,999,995 54,000,000Dividend per Share* 1.08 1.12 0.67

* Dividends per Share rounded to the nearest two decimal places.

7.7.5 Properties Owned by the HMP Group and Directors’ Interests in Such Assets

Details of the Company’s properties and its other assets as at March 31, 2009 are as follows.

Table 7-5 : Property Owned by HMP Group

Project Address Ownership Details

Area Extent (ha)

BV/ Cost of Land

(Rs.Mn)

BV of Civil Works

(Rs. Mn)

BV of Plant & Equipment

(Rs.Mn)Giddawa SHP

Giddawa, Teldeniya

FreeholdGoSL*

0.91140.7200

6.23 216.39 165.40

Magal Ganga SHP

Dikellakanda,Deraniyagala

FreeholdLeasehold

0.08800.8384

1.08 5.20 -

* Construction on these lands has been carried out consequent to approval granted by the relevant Divisional Secretaries.

Remaining formalities with regard to transfer of ownership/rights for these lands are currently being processed by relevant GoSL authorities.

The Directors hold no interest in properties acquired, disposed or leased by the Company during the two years preceding listing on the CSE. Furthermore, it is not proposed that the Directors will hold any interest in assets to be acquired, disposed, or leased by the Company in the two years succeeding the listing.



7.7.6 Details of Material Indebtedness

The Company’s total loan capital outstanding as at July 31, 2009 is given in Table 7-6 below.

Table 7-6 : Interest Bearing Loans and Borrowings of HMP as at July 31, 2009

Amount repayable within 1 year

(Rs.)

Amount repayable after 1 year

(Rs.)

Total

(Rs.)GroupDebentures 8,556,149 3,565,062 12,121,211 Long Term USD Syndicated Loan 373,200,685 213,205,364 586,406,050 Long-term Rupee Loan 14,117,646 - 14,117,646 Short-term Rupee Loan - - - Related Party Loans - 39,305,000 39,305,000 Bank Overdraft 740,873,140 - 740,873,140

1,136,747,621 256,075,426 1,392,823,048 CompanyRelated Party Loan - Hemas Holdings PLC - 37,250,000 37,250,000Bank Overdraft 6,574,246 - 6,574,246

6,574,246 37,250,000 43,824,247

Particulars of term loans and other borrowings as at July 31, 2009 are as follows:

1. The Company obtained a banking facility of Rs. 10,000,000/- by way of a fluctuating overdraft from HSBC, Colombo on June 24, 2009. For this facility a corporate guarantee for Rs. 10,000,000/- was given to HSBC Colombo by the parent company, Hemas Holdings PLC.

2. There has been no change in the terms and particulars of loans disclosed in Note 21 to the Audited Financial Statements for the year ended March 31, 2009 other than the overdraft facility mentioned in (1) above.

There are no liabilities under acceptance other than of trading nature and no acceptance credit outstanding as at the period

ended July 31, 2009.



As at the period ended July 31, 2009 there are no lease, lease purchase or hire purchase commitments of the HMP Group apart from those mentioned in Table 7-7 below.

Table 7-7 : Leasehold Land held by Magal Ganga Project

Land Address Area (ha)

Commencing From

Lessor Lease Period (Years)

Annual Lease Rental

(Rs.)

Clauses

Pandeniyahena 0.4597 December 12,2007

GoSL - Deraniyagala Divisional Secretariat

30 29,000 Sole purpose is to build up a Hydro Power Plant

Naranwelagawahena 0.3787 October 01,2007

GoSL - Deraniyagala Divisional Secretariat

Renewed Annually

30,680 Pre-approval required from Divisional Secretariat for building up on the land

As at the period ended July 31, 2009 apart from those details given under Note 26 of the Audited Financial Statements as at the year ended March 31, 2009, there has been no change in mortgages and charges on the assets of the Company.

As at the period ended July 31, 2009 apart from those details available under Note 28 of the Audited Financial Statements as at the year ended March 31, 2009, there are no guarantees outstanding and there has been no change in material contingent liabilities.

7.7.7 Working Capital

The Board is of the opinion that the working capital is sufficient for the purpose of normal day to day operations of the Company.

7.7.8 Litigation, Disputes and Contingent Liabilities

There are no material legal, arbitration or mediation proceedings which may have or have had in the recent past affected the financial position or profitability of the Company.

As at the date there are no penalties imposed by any regulatory and state authorities.

Details of material contingent liabilities are available under Note 28 of the Audited Financial Statements as at the year ended March 31, 2009.

7.7.9 Material Contracts

The Company has not entered into any material contracts other than those contracts entered into as part of the ordinary course of business.

7.7.10 Details of Commissions Paid

No commission has been paid in the two years preceding the IPO for subscribing or agreeing to subscribe or procuring or agreeing to procure subscriptions for any shares of the Company.

7.7.11 Details of Benefits Paid to Promoters

No benefits have been paid or given within the two years preceding the IPO and there are no benefits intended to be paid or given to any promoter.



8.1 The Board of Directors

The Board of Directors supervises the business and operations of HMP. The Board consists of two (02) Independent Directors, four (04) Non-Executive Directors and the Managing Director. The Board has the power to appoint the Executive Directors including the Managing Director. As at the date of this Prospectus, the Board comprises the following seven (07) Directors.

Table 8-1 : Details of HMP Board of Directors

Name Age Address

Mr. Husein Nuruddin Esufally 48 No. 76/4, Flower Road, Colombo 03

Prof. Kulatilleke Arthanayake Malik Kumar Ranasinghe 51 No.18, Layards Road, Colombo 05

Mr. Sanjiva Kanishka Gamini Senanayake 59 No.164/16, Nawala Road, Nugegoda

Mr. Imtiaz Abidhusein Esufally 50 No. 76/14, Flower Road, Colombo 03

Mr. Warnage Malinga De Fonseka Arsakularatne 38 No. 8/3, Ceylinco Nivasa, Shalawa Road,Mirihana

Mr. Mahmud Riad Ameen 34 No. 01, Col. T.G. Jayawardene Mawatha, Colombo 03

Mr. Godakande Aratchige Kishantha Nanayakkara 42 No.176/3, Stanley Tillekeratne Mawatha, Nugegoda

8.2 Profile of the Board of Directors

Mr. Husein Esufally – Chairman/Non-Executive Director

Mr. Esufally was appointed as the Chairman of HMP in 2009. He is also the Chief Executive Officer of Hemas Holdings PLC. Mr. Esufally has over 28 years of management experience. Mr. Esufally holds a BSc (Honours) Degree in Electronics from the University of Sussex, UK. He is also a Trustee at the National Council for Mental Health (Sahanaya) and is also the founder member of the Association for Rehabilitation of Spinal Cord Injuries (ARSCI).

Prof. Malik Ranasinghe – Independent Director

Prof. Ranasinghe was appointed to the Board of Hemas Power Limited as an Independent Director in 2009. He is the Vice-Chancellor of the University of Moratuwa and a Professor in Civil Engineering. Prof. Ranasinghe is also the Chairman of the Committee of Vice - Chancellors and Directors of Sri Lanka and a council member of Association of Commonwealth Universities. He is a former Independent Director of Lanka IOC and the Colombo Stock Exchange. Prof. Ranasinghe is a Chartered Engineer, a Fellow of the Institution of Engineers, Sri Lanka and a Fellow of the National Academy of Sciences, Sri Lanka. He completed his Ph.D at the University of British Columbia as a Canadian Commonwealth Scholar in 1990. Prof. Ranasinghe is recognized as a prominent personality by both academic and professional communities in Sri Lanka. In 1993, he was awarded the General Research Committee Award for Outstanding Contribution to Sri Lankan Science by Sri Lanka Association for the Advancement of Science (SLAAS).

Mr. Sanjiva Senanayake – Independent Director

Mr. Senanayake was appointed to the Board of Hemas Power Limited as an Independent Director in 2009. He brings in a wealth of experience having served in several key positions in national and international organizations. Mr. Senanayake joined IFC in 1996 as a consultant and held the position of resident representative to Sri Lanka and Maldives from 1998 to 2006. In 2006, he was appointed as the Head of Financial Markets and Investments – West Africa and held this position until

8.0 cORPORATE STRucTuRE


his retirement in April 2009. Prior to his appointment at IFC he has served as the Assistant General Manager-Treasury and Investment Banking at National Development Bank of Sri Lanka. He has also held several key positions in the CitiBank group in various countries including Sri Lanka. Mr. Senanayake holds an MSc in Communication Engineering from the Imperial College of Science and Technology, University of London, UK and a BSc in Electronic and Electrical Engineering from King’s College, University of London, UK.

Mr. Imtiaz Esufally – Non-Executive Director

Mr. Imtiaz Esufally holds a Bachelor of Arts (Honours) Degree in Accounting and Economics from the University of Kent, UK. He is also a Director of HHL. He currently heads the Hemas Group’s transportation sector and has over 20 years management experience in this field. He has been in the forefront of the aviation industry in Sri Lanka. He was also a past president of the IATA Agents Association of Sri Lanka.

Mr. Malinga Arsakularatne – Non-Executive Director Mr. Arsakularatne functions as the Chief Financial Officer of Hemas Holdings PLC. He is also a member of the Board of

Management of HHL. He has been part of the Hemas Group for the past 5 years and has over 10 years of experience in the fund management industry. Mr. Arsakularatne is a CFA charterholder and a Fellow Member of the Chartered Institute of Management Accountants (CIMA), UK. He also holds an MSc in Investment Management from the City University Business School, UK, a BSc in Computer Science & Engineering from the University of Moratuwa, Sri Lanka, and a Postgraduate Diploma in Marketing from the Chartered Institute of Marketing (CIM), UK.

Mr. Riad Ameen – Non-Executive Director

Mr. Ameen functions as the legal consultant to Hemas Holdings PLC. He is also a member of the Hemas Group Operations Committee (GOC) of HHL. He holds a Bachelor’s Degree in Law (LLB) from the University of Colombo. He is a Barrister of the Lincon’s Inn, UK and is an Attorney-at-Law of the Supreme Court of Sri Lanka. He served as a State Counsel in the Attorney General’s Department for 7 years and currently practises in the private bar. He has also served as a consultant to the Public Enterprises Reform Commission (PERC). He has been associated with the Hemas Group for the past 3 years. Mr. Ameen has been in active practice in the field of civil law for the past 11 years with focus in public law, law of taxation and commercial law.

Mr. Kishantha Nanayakkara – Managing Director

Mr. Nanayakkara is the Managing Director of Hemas Power Limited and has been holding the position since the inception of the Company in 2003. He is also part of the Board of Management of HHL. Mr. Nanayakkara is a Fellow of the Chartered Institute of Management Accountants (CIMA), UK and holds an MSc in Finance from the Birmingham Business School, University of Birmingham, UK. He has held several senior management positions and directorships in companies ranging from manufacturing to financial services for the past 18 years. Mr. Nanayakkara has served as an advisor to the National Council for Economic Development (NCED) and as a consultant to the PERC in the past and at present serves on the Board of the Sri Lanka Sustainable Energy Authority (SEA).

cORPORATE STRucTuRE


8.3 Directors’ Interest in Shares

8.3.1 Directors’ Direct and Indirect Shareholdings in the Company

The Directors’ direct shareholdings in the Company as at August 10, 2009 are tabulated below.

Table 8-2 : Directors’ Shareholdings in HMP as at August 10, 2009

Name of Director Number of Shares HeldMr. Husein Esufally* 1Prof. Malik Ranasinghe -Mr. Sanjiva Senanayake -Mr. Imtiaz Esufally* 1Mr. Malinga Arsakularatne -Mr. Riad Ameen -Mr. Kishantha Nanayakkara -

*Mr. Husein Esufally and Mr. Imtiaz Esufally hold direct and indirect shareholding in Hemas Holdings PLC which is the parent company of HMP.

8.3.2 Directors’ Shareholdings in Subsidiaries

The Directors’ shareholdings in subsidiaries of HMP as at August 10, 2009 are as follows.

Table 8-3 : Directors’ Shareholdings in HMP Group Companies as at August 10, 2009

Hemas Power Limited Heladhanavi LimitedHusein Esufally – Ordinary Voting Shares 1 1Imtiaz Esufally – Ordinary Voting Shares 1 1Kishantha Nanayakkara – Ordinary Non-voting Shares Nil 750,000

8.3.3 Sale or Purchase of Shares by Directors

No Director of the Company has been engaged in sale or purchase of shares of HMP during the year immediately preceding the date of the issue of this Prospectus.

8.4 Directors’ Emoluments

Emoluments paid in the form of salaries or bonuses to the Directors during FY 2008/09 amounted to Rs. 3.56 Million. The Directors are expected to be remunerated in the form of salaries or bonuses during the FY 2009/10 to an approximate extent of Rs. 4.92 Million.

cORPORATE STRucTuRE


8.5 Other Directorships Held by the Board

Enumerated below are the directorships held by the Board in other institutions.

Table 8-4 : Other Directorships

Name of Director Other Directorships Held

Husein Nuruddin Esufally Director

ACX International (Private) Limited Diethelm Travel Lanka (Private) Limited Exchange & Finance Investments (Private) Limited Forbes Air Services (Private) Limited Giddawa Hydro Power (Private) Limited Heladhanavi Limited Hemas Air Services (Private) Limited Hemas Corporate Services (Private) Limited Hemas Hospitals (Private) Limited Hemas Manufacturing (Private) Limited Hemas Marketing (Private) Limited Hemas Pharmaceuticals (Private) Limited Hemas Travels (Private) Limited Hemtours (Private) Limited. Hotel Sigiriya PLC Okanda Power Grid (Private) Limited Serendib Hotels PLC Serendib Leisure Management Limited Stafford Hotels PLC Vishwa BPO (Private) Limited

Director/Chief Executive Officer Hemas Holdings PLC

Sanjiva Senananyake DirectorMaldives Finance Leasing Co., Maldives

Imtiaz Esufally Director ACX International (Private) Limited Discover the World Marketing (Private) Limited Exchange & Finance Investments (Private) Limited Far Shipping Lanka (Private) Limited Forbes Air Services (Private) Limited Hellmann Worldwide Logistics (Private) Limited Hemas Air Services (Private) Limited Hemas Aviation (Private) Limited Hemas Holdings PLC Hemas International Freight (Private) Limited Hemas Travels (Private) Limited Hemas Transportation (Private) Limited Mercantile Shipping Co. PLC N – able (Private) Limited Skynet Worldwide Express (Private) Limited

cORPORATE STRucTuRE


Malinga Arsakularatne Director ACX International (Private) Limited Conventions Asia (Private) Limited Diethelm Travel Lanka (Private) Limited Discover the World Marketing (Private) Limited Exchange & Finance Investments (Private) Limited Forbes Air Services (Private) Limited Go Asia Airlines (Private) Limited Giddawa Hydro Power (Private) Limited Hemas Air Services (Private) Limited Hemas Aviation (Private) Limited Hemas Corporate Services (Private) Limited Hemas Developments (Private) Limited Hemas Foods (Private) Limited Hemas Manufacturing (Private) Limited Hemas Marketing (Private) Limited Hemas Pharmaceuticals (Private) Limited Hemas Surgical & Diagnostics (Private) Limited Hemas Travels (Private) Limited Hemas Transportation (Private) Limited Hemtours (Private) Limited Hotel Sigiriya PLC Serendib Hotels PLC Serendib Leisure Management Limited Stafford Hotels PLC Vishwa BPO (Private) LimitedKishantha Nanayakkara Director Giddawa Hydro Power (Private) Limited Heladhanavi Limited Okanda Power Grid (Private) Limited

8.6 Directors’ Interest in Assets and Contracts

The Directors hold no interests in assets acquired, disposed or leased by the Company during the two years preceding the Offering. Furthermore, it is not proposed that the Directors will hold any interest in assets to be acquired, disposed or leased by the Company in the two years subsequent to the Offering.

cORPORATE STRucTuRE


There are no contracts or arrangements in force as at July 31, 2009 in which the Directors of Hemas Power Limited are materially interested in relation to the business of the Company other than items mentioned below.

Details of Directors’ Interest in Contracts

Table 8-5 : Directors’ Interest in Contracts

April 01 to July 31,

2009FY 2008/09 FY 2007/08

Related Party Relationship Director Nature of Transaction Rs. Rs. Rs.

Hemas Holdings PLC

Parent Company

Mr. H EsufallyMr. I Esufally

Corporate Guarantee Charges

- - 46,875

IT Charges 133,502 257,250 184,688Consultancy Charges HR & Payroll

114,880 - -

Inter Company Interest 2,288,675 7,730,361 8,939,235

Hemas Corporate Services (Private) Limited

Hemas Group Company

Mr. H EsufallyMr. M Arsakularatne

Corporate Service Charges 494,223 988,037 318,626

Telephone Expenses 20,419 66,234 63,733

Hemas Travels (Private) Limited

Hemas Group Company

Mr. H EsufallyMr. I EsufallyMr. M Arsakularatne

Foreign Travelling Expenses

- 335,684 737,355


SubsidiaryMr. H EsufallyMr. K NanayakkaraMr. M Arsakularatne

Inter Company Interest Income - - 8,939,235

Okanda Power Grid (Private) Limited

Subsidiary Mr. H EsufallyMr. K Nanayakkara

Reimbursement of Expenses 131,000 7,054,723 33,980

Fund Transfers 2,236,230 1,135,000 -Heladhanavi Limited Joint Venture Mr. H Esufally

Mr. K NanayakkaraDividend Received 93,176,471 101,647,060 89,999,995

cORPORATE STRucTuRE


8.7 Statement - Board of Directors

No Director or a person nominated to become a Director of the Company has been involved in any of the following:

A petition under any bankruptcy laws filed against such person or any partnership in which he was a partner or any corporation of which he was an executive officer;

Conviction for fraud, misappropriation or breach of trust or any other similar offence which the CSE considers a disqualification.

8.8 Corporate Governance Practices

The Directors place a high degree of importance on sound corporate governance practices and is committed to the highest standards of corporate governance within their organisation. Corporate governance practices of the Company are positively influenced by the extensive entrepreneurial governance initiatives employed by its parent HHL.

The Company understands, supports and has applied the core concepts that underlie enterprise governance and ensures that its standards remain in compliance with regulatory requirements of the CSE listing rules.

In line with this, the Company has appointed two Independent Directors to the Board of HMP facilitating independent judgement

in Board discussions and decisions. The Board also consists of four Non-Executive Directors and the Managing Director who provide the specific industry and business intellect to decision making.

In line with this, Directors and functions of the above committees are detailed below.

8.8.1 Remuneration Committee

The Remuneration Committee consists of two Independent Directors and one Non-Executive Director. Mr. Husein Esufally, Chairman of HMP is also the Chairman of the Remuneration Committee. The other members of the Remuneration Committee are Mr. Sanjiva Senanayake and Prof. Malik Ranasinghe. The committee is responsible for setting up the remuneration policy and making recommendations to the Board on;

Remuneration framework and levels of the Senior Management Senior Management performance and equity based remuneration plans including performance incentives and hurdles Remuneration of Executive Directors

Aggregate remuneration paid to Executive and Non-Executive Directors during last year and amount expected to be paid in the current year is given under Section 8.4 of this Prospectus.

8.8.2 Audit Committee

The Audit Committee comprises two Independent Directors and one Non-Executive Director. The current members of the Audit Committee are Mr. Sanjiva Senanayake, Chairman of the Committee, Prof. Malik Ranasinghe and Mr.Malinga Arsakularatne. The Managing Director and the Head of Finance attend meetings of the Audit Committee by invitation. The Committee is responsible for the following;

Evaluating and monitoring the Company’s control environment and risk management function Overseeing and reviewing the quality, cost and scope of internal and external audits Reviewing the reports presented to the Committee by both auditors and management Recommending to the Board the appointment of internal and external auditors Reviewing the Company’s management and statutory reporting Reviewing and approving of finance and accounting policies and the ongoing monitoring of their implementation and

effectiveness

cORPORATE STRucTuRE


Ongoing financial monitoring of the Company’s various disclosure obligations The review and pre-approval of any non audit services provided by the internal or external auditors to ensure their

independence is maintained at all times 8.9 Senior Management

Senior Management of Hemas Power Limited is set out in the following table.

Table 8-6 : Senior Management of HMP

Name DesignationMr. Kishantha Nanayakkara Managing DirectorMr. Ravi Rathnasekera Head of FinanceMr. Krishantha Wimalasiri Project ManagerMr. Prasad Mudugama Project Manager

Mr. Ravi Rathnasekera – Head of Finance Mr. Rathnasekera is an Associate Member of the Institute of Chartered Accountants of Sri Lanka (ICASL). He counts over four

years post qualifying experience as an Accountant with two years experience in the power sector. Mr. Rathnasekera also holds an MBA from University of Leicester, UK.

Mr. Krishantha Wimalasiri – Project Manager Mr. Wimalasiri holds a BSc in Electrical Engineering from the University of Moratuwa, Sri Lanka. He is also an Associate

Member of the Institution of Engineers, Sri Lanka. He was actively involved in the development of Giddawa hydropower project. Having previously worked as a Design Engineer at a multinational engineering company, Mr. Wimalasiri counts over five years post qualifying experience of which more than two years have been in the power sector with specific exposure to project management.

Mr. Prasad Mudugama – Project Manager Mr. Mudugama holds a BSc in Mechanical Engineering from the University of Moratuwa, Sri Lanka and a BSc in Defense

Studies and Military Engineering from Sir John Kotelawala Defence University, Sri Lanka. He is also an Associate Member of the Institution of Engineers, Sri Lanka. He has over twelve years post qualifying experience in electromechanical engineering with exposure to planning, designing, implementation, maintenance and management of electromechanical and process plant installations. Mr. Mudugama also has expertise in reconnaissance surveys, feasibility studies, design, systems planning and project management of small hydro and diesel power plants both locally and overseas. He is also a registered consultant of the SEA.

Apart from the aforementioned senior management, HMP draws human resource management, IT, finance, accounting, administrative, legal and secretarial related services from Hemas Group companies as and when required.

8.10 Senior Managements’ Emoluments

Emoluments paid to the Managing Director and the Senior Management in the form of salaries or bonuses during FY 2008/09 amounted to Rs. 6.44 Million. The Managing Director and the Senior Management are expected to be remunerated in the form of salaries and bonuses during the FY 2009/10 to an approximate extent of Rs. 7.21 Million.

cORPORATE STRucTuRE


8.11 Statement – Managing Director / Chief Executive Officer

Chief Executive Officer/Managing Director of the Company has not been involved in any of the following:

A petition under any bankruptcy laws filed against such person or any partnership in which he was a partner or any corporation of which he was an executive officer;

Conviction for fraud, misappropriation or breach of trust or any other similar offence which the CSE considers a disqualification.

8.12 Details of Management Agreements

Operation and maintenance agreement dated September 22, 2003 between Heladhanavi Limited and Lakdhanavi Limited.

Heladhanavi Limited (Owner) has entered into an agreement with Lakdhanavi Limited (Operator) to provide all day to day operations and maintenance services for the plant facility located at Puttalam. The obligations of the Operator include ensuring compliance in relation to the project agreements Heladhanavi has entered into with various other parties (e.g. terms and conditions on operation and maintenance outlined in the PPA). The Owner is required to pay Lakdhanavi an operating fee, which comprises a fixed fee, and a variable fee which is dependent on the net energy output generated.

8.13 Human Resources

The current staff strength of HMP Group is twenty one consisting of five executives and sixteen non executive employees of which majority is stationed in site locations at Giddawa and Magal Ganga. The majority of the non executives are engaged in on-site operations and maintenance.

IT and administrative services for the Company are provided by Hemas Corporate Services (Private) Limited. In addition, accounting, payment/receipts processing and MIS related services to HMP are rendered by shared services network of the Hemas Group for a fee.

Management of Heladhanavi Limited, the joint venture between Lakdhanavi and HMP, is outsourced to Lakdhanavi. Employees operational at the plant site are employed by Lakdhanavi and for the management of operations, Heladhanavi pays a fee to Lakdhanavi based on the terms outlined in the O&M contract.

The employees of the Company are not members of any trade unions. Therefore, the Company has not entered into any collective agreements with the employees.

cORPORATE STRucTuRE


HMP is the holding company of Giddawa Hydro Power (Private) Limited and Okanda Power Grid (Private) Limited and also jointly owns Heladhanavi Limited as mentioned earlier. HMP does not carry out any business operations on its own other than those through its subsidiaries/joint ventures.

9.1 Operational Results

9.1.1 Electricity Generation and Average Tariff of Heladhanavi Limited

Since its commissioning in 2004, Heladhanavi has generated electricity as per CEB requirements except for in year 2006 (please refer Section 7.3.1 for details). The average cost per unit of the plant is depicted in Table 9-1. As indicated in Table 7-1, the tariff paid for an energy unit is the lowest amongst incumbent thermal IPPs. Due to this reason CEB prefers to purchase power from Heladhanavi, resulting in the plant being operated at a high utilisation level.

Table 9-1 : Electricity Generation and Average Tariff of Heladhanavi Limited

Year ofOperation

Units Generated(GWh)

Cost of Generationfor the Year to CEB

(Rs. Mn)

AverageTariff Paid (Rs./kWh)

2004 * 203 1,414 6.972005 759 6,058 7.982006 619 6,563 10.602007 748 9,656 12.912008 692 11,626 16.80

Source: Based on CEB Statistical Digests from 2004 – 2008 * The plant commenced operations on September 30, 2004 Heladhanavi calculates its utilisation based on a twelve month period starting December 8 of each year. The plant utilisation

is a function of plant-running-hours against plant-available-hours. As highlighted in the Table 9-2 below, it is apparent that the plant has maintained its utilisation at rates above the expected 80% except for in the year 2006.

Table 9-2 : Heladhanavi Limited Plant Utilisation

Twelve month period ending Energy Sales (GWh)

Plant Utilisation(%)

December 7, 2004 * 147.12 93.68December 7, 2005 765.22 94.81December 7, 2006 640.45 79.23December 7, 2007 722.72 91.00December 7, 2008 689.17 95.01

Source: Heladhanavi Limited * The plant commenced operations on September 30, 2004 9.1.2 Electricity Generation and Applicable Tariff for Giddawa Hydro Power (Private) Limited

Giddawa SHP was commissioned in October 2008. As at the end of its first operational financial year ended March 31, 2009, Giddawa SHP has generated energy as stated in Table 9-3. As per the renewable energy purchase tariff published for the years 2008 and 2009, Giddawa SHP was paid Rs. 8.94 per kWh during the last three months of 2008, Rs. 10.59 per kWh in January 2009 and Rs. 11.17 per kWh in February and March 2009 (please refer Section 7.4.2 for more details on Giddawa SHP tariff structure). It should be noted that as per the tariffs, the months February, March and April are classified as “Dry Months”.

9.0 fINANcIAl OVERVIEw Of THE cOmPANy


As highlighted in the Table 9-3, generation during the months of February and March 2009 has been low in comparison to other months. However, since the plant has only been in operation from October 2008, it may not be prudent to project future generation purely based on these figures.

Table 9-3 : Electricity Generation, Revenue and Average Plant Utilisation of Giddawa SHP

Month of Operation

Units Generated (kWh)

Revenue for the Month(Rs.)

Average MonthlyPlant Utilisation

Oct-08 * 151,860 1,357,628 45.2%Nov-08 542,220 4,847,447 34.2%Dec-08 824,400 7,370,136 50.5%Jan-09 399,696 4,232,781 26.9%Feb-09 ** 106,618 1,190,917 7.9%Mar-09 ** 184,515 2,061,033 14.8%

* Plant commenced its operations on October 23, 2008 ** February, March and April are classified as Dry Months by the CEB 9.2 Financial Results

In the preparation of consolidated accounts for HMP, the financial results of Heladhanavi Limited, a joint venture company, is integrated to HMP group on proportionate consolidation basis whilst the results of Giddawa Hydro Power (Private) Limited and Okanda Power Grid (Private) Limited, being 100% owned subsidiaries, are consolidated in full.

Salient extracts from the Group Income Statement and the Balance Sheet highlighting the historical performance of the HMP Group during the five year period ended March 31, 2009 based on the Audited Financial Statements are presented below in Table 9-4 and Table 9-5.

Table 9-4 : Summary Income Statement of HMP Group for the year ended March 31, 2005 to 2009

For the year ended March 31,

All figures in Rs. ‘000

2005 2006 2007 2008 2009Revenue 1,402,258 2,924,949 3,667,242 4,966,160 4,868,560 Gross Profit 261,111 535,351 578,267 596,553 573,638 Profit/(Loss) From Operating Activities 215,928 483,008 522,877 552,286 481,547 Net Profit Before Tax 109,514 255,733 304,066 294,532 230,135 Net Profit After Tax 109,494 255,733 304,066 294,503 230,145 Preference Dividend Paid* 5,951 11,753 10,003 7,565 7,327

Profit Attributable to Ordinary Shareholders of HMP 103,543 243,980 294,064 286,938 222,818

Earnings per Share (Rs.) 5.26 3.94 3.67 3.58 2.37 * Preference dividends paid are in respect of preference shares issued by Heladhanavi and Giddawa SHP. Details of preference shares issued by these

companies are available in Note 19.1 of the Audited Financial Statements for the year ended March 31, 2009 and Note 6 of the Interim Financial Statements for the quarter ended June 30, 2009.

fINANcIAl OVERVIEw Of THE cOmPANy


Table 9-5 : Summary Balance Sheet of HMP Group as at March 31, 2005 to 2009

As at March 31,

All figures in Rs. ‘000

2005 2006 2007 2008 2009Power Plant 2,821,832 2,627,223 2,432,614 2,106,357 2,087,778Land and Buildings and WIP 5,095 8,202 57,562 234,838 245,713Other Non-Current Assets 7,440 3,218 3,841 2,450 19,289Other Investments and Goodwill* - 42,933 143,367 170,839 20,405Current Assets 883,787 1,063,221 1,296,774 1,555,912 1,351,330

TOTAL ASSETS 3,718,154 3,744,797 3,934,158 4,070,397 3,724,516Shareholders’ Equity 879,287 1,250,360 1,381,916 1,668,135 1,795,592Non-Current Liabilities 1,839,895 1,526,661 1,175,589 801,952 399,190Current Liabilities 998,972 967,776 1,376,653 1,600,309 1,529,735

TOTAL EQUITY & LIABILITIES 3,718,154 3,744,797 3,934,158 4,070,397 3,724,516Net Asset Value per Share (Rs.) 14.09 14.45 16.30 17.13 18.06

*Investments in Vishwa BPO (Private) Limited and Hemas Hospitals (Private) Limited were transferred to Hemas Holdings PLC at Rs. 10,000,000 and

Rs. 140,886,090 respectively during FY 2008/09.

9.2.1 Revenue

Prior to FY 2008/09, the revenue of HMP Group solely represented the share of revenue from Heladhanavi Limited as it was the only power plant HMP had an ownership stake in. Giddawa SHP was commissioned in FY 2008/09 and is expected to contribute towards HMP Group revenue in the subsequent years. Until October 2008, the prices of HFO (which is used to operate the Heladhanavi Plant) were following a steep upward trend in line with the global oil price hike. This trend reversed in the latter part of 2008. During the financial year ended March 2009, HMP recorded revenue of Rs. 4.87 Billion, a marginal drop of 2% compared to the preceding year. The decline in revenue is mainly attributable to reduction in HFO prices which is a “pass-through” under the PPA. However, this decline in revenue due to reduction in pass-through costs does not impact Heladhanavi’s net profit significantly since the cost of electricity generation also reduces correspondently.

9.2.2 Profitability

The financial results of the Company show that the Group had stable profitability until FY 2007/08. The profitability experienced a downward movement in FY 2008/09. The decline in profitability is largely attributed to the increased working capital financing cost at Heladhanavi plant resulting from escalating oil prices and high interest rates which prevailed during the early part of FY 2008/09. For the forthcoming three financial years starting from FY 2009/10, Heladhanavi’s operating profits are expected to be less than the operating profit reported in FY 2008/09 due to higher O&M costs expected, as well as a reduction in capacity charge. However, provided that oil prices prevail at current levels and interest rates are sustained at existing levels, the working capital requirement of Heladhanavi is likely to be lower. This would result in lower financing costs. In addition, the repayment of the majority of the term loan by FY 2010/11 is expected to further reduce the finance cost of Heladhanavi. The reduction in finance cost would mitigate the adverse impact to Heladhanavi’s profits from higher O&M costs to some degree.

On the other hand from FY 2009/10 onwards the HMP Group will experience full scale operations of Giddawa SHP whereas Magal Ganga SHP is expected to operate in full scale commencing FY 2011/12. Hence, going forward a considerable level of contribution to HMP Group’s profitability is expected to be derived from the performances of its SHPs.



9.2.3 Gearing

The Group’s gearing has substantially reduced over the years. Major portion of Heladhanavi’s capital was funded through a syndicated loan of USD 39 Million in 2004. The syndicated loan has a tenure of 7 years and is due to be fully repaid in FY 2010/11. The outstanding amount as at March 31, 2009 was USD 13.1 Million. With the repayment of the syndicated loan, the Group’s gearing has reduced from a level of 71.34% (calculated as long term debt/long term debt + total capital and reserves) in FY 2004/05 to 18.16% in FY 2008/09 (refer Table 9-6). However, Giddawa SHP does not have any long-term debt financing obligations as the project was funded via a combination of ordinary and preference shares. Relatively low gearing would enhance HMP’s borrowing power and future financing options available to facilitate growth.

Table 9-6 : HMP Group Gearing

For the year ended March 31, 2005 2006 2007 2008 2009Long Term Gearing 71.34% 54.97% 45.96% 32.45% 18.16%

- Only the long term debt portion has been considered



As at the date of this Prospectus, the Stated Capital of the Company is Sri Lanka Rupees Nine Hundred and Thirty Nine Million and Twenty (Rs. 939,000,020) divided into Ninety Three Million Nine Hundred Thousand and Two (93,900,002) fully paid Ordinary Shares.

10.1 An Overview of the Capital Structure The detailed breakdown of the Stated Capital of HMP is given below.

Table 10-1 : Capital Structure of HMP

FY 2008/09Rs.

FY 2007/08Rs.

FY 2006/07Rs.

Balance as at April 01,93,900,002 Ordinary Shares (Note I) 939,000,020 802,000,020 802,000,020

New Issue of Shares in March 200813,700,000 Ordinary Shares (Note II) - 137,000,000 -

Balance as at March 31,93,900,002 Ordinary Shares 939,000,020 939,000,020 802,000,020

Note I: Number of Ordinary Shares as at April 01, 2007 was 80,200,002.

Note II: The Company increased the Stated Capital through a new issue of 13,700,000 shares at a price of Rs. 10/- per share on March 26, 2008.

The Company has not issued any other class of shares other than the Ordinary Voting Shares, details of which are given in Table 10-1 above.

There are no restrictions on purchase of shares by non-residents in Hemas Power Limited.

10.2 Free Transferability of Securities There are no statutory restrictions on the free transferability of the issued shares.

10.3 Take-over Offers

There have been no take-over offers by third parties in respect of HMP’s shares during the past two years.

The Company acquired Okanda Power Grid (Private) Limited in January 2008 at a cost of Rs. 22.6 Million. HMP has not made any takeover offers in respect of shares of a third party other than the abovementioned company.

10.4 Shareholders of HMP Prior to the Offering

Tabulated below are the shareholders of the Company as at August 10, 2009.

Table 10-2 : Shareholders of HMP

Name of the Shareholder No of Shares Percentage of Shareholding

Hemas Holding PLC 93,900,000 100.00 (Approx.)Husein Esufally 1 0.00Imtiaz Esufally 1 0.00

10.0 cAPITAl STRucTuRE


10.5 Principal Shareholders Subsequent to the Offering

Tabulated below are the shareholders of the Company succeeding the Offering, assuming full subscription.

Table 10-3 : Shareholders of HMP Subsequent to the Offering

Name of the Shareholder No. of Shares Percentage of ShareholdingHemas Holding PLC 93,900,000 75.00Husein Esufally 1 0.00Imtiaz Esufally 1 0.00Public Holding 31,300,000 25.00

Total 125,200,002 100.00

10.6 Details of Other Changes to Stated Capital

HMP has not engaged in any share redemption, repurchase or reduction in Stated Capital in the two years preceding the date of this Prospectus.

10.7 Details of Convertible Debt Securities

The Company has no outstanding convertible debt securities.

10.8 Details of Shares Sold Privately in Conjunction with the IPO

No shares are being issued privately in conjunction with the IPO.

cAPITAl STRucTuRE


In relation to risk factors included in Section 11.0, HMP shall mean the parent company Hemas Power Limited and its joint venture/subsidiary companies, Heladhanavi Limited, Giddawa Hydro Power (Private) Limited and Okanda Power Grid (Private) Limited.

The risk factors that follow may be considered material to investors in making an informed judgment on the Company. Since HMP’s sole presence is in power generation, the business related risks are focused into a single sector. If any of the considerations and uncertainties given below develops into actual events, the Company’s business, financial conditions or results of operations and prospects could be materially and adversely affected and this may impact the market price of the Offered Shares. However, given the necessity of power generation for smooth functioning of the economy, demand for HMP’s business is expected to be sustainable in the foreseeable future.

11.1 Risks Relating to Political and Macroeconomic Factors

11.1.1 Political and economic changes in Sri Lanka could adversely affect the operations of the HMP Group

The Government of Sri Lanka exercises a significant influence over many aspects of the economy. The Company’s business and financial performance could get affected by political instability of the country and the region. An unstable political environment could reduce the economic growth of the country and consequently, the demand for energy. However, as a result of the country’s three decade long civil war coming to an end, it can reasonably be expected that investments would flow in to uplift the infrastructure facilities in the Northern, Eastern and other regions of the country including investments in the power sector. Availing such opportunities to the private sector would enable companies such as HMP to pursue new opportunities emerging in this area.

Since a portion of Heladhanavi’s income, operational costs, interest expenses and capital repayments are in USD, exchange rate fluctuations may have an impact on its financial results. However, the USD syndicated loan raised to finance part of the Heladhanavi plant is reaching its maturity thus minimising the currency risk attached to this loan. Several tariff components in Heladhanavi are priced in USD and any appreciation of the Rupee would adversely affect Heladhanavi’s income. However, empirical evidence suggests that in the medium to long term the Rupee had been continuously depreciating against the USD except in a few exceptional circumstances. On the other hand, depreciation of the Rupee could also have an adverse impact on Heladhanavi’s USD borrowings. Therefore, Heladhanavi’s USD denominated income and expenses form a partial natural hedge to the risk of exchange rate volatilities as long as USD borrowings exist.

Furthermore, Rupee depreciation may have a favourable impact on avoided cost tariff applicable to Giddawa SHP. The avoided cost tariff has an inverse relationship with local oil prices which in turn are directly impacted by Rupee depreciation. At the same time the proposed Magal Ganga SHP is expected to operate on cost-based tariff, hence, the escalation rate applicable to the escalable component of this tariff is also likely to be increased by higher Rupee depreciation. Therefore, HMP Group may be able to further negate the adverse impact of Rupee depreciation to some extent through income from its SHPs.

11.1.2 A slowdown in economic growth in Sri Lanka could cause the business to suffer

The Sri Lankan economy has sustained a Gross Domestic Product (GDP) growth of 6 percent and above over the past three years. Traditionally, demand for electricity has been correlated to growth of the economy. However, this is not observed in the recent past as electricity demand growth has been somewhat sluggish. Demand increase during the year 2008 was only a marginal 0.9%. This was mainly due to upward revision of consumer tariffs by CEB and higher electricity cost which in turn reduced the domestic and industrial electricity consumption. Further, the civil war which prevailed in the country had hindered the economic growth in Northern and Eastern regions of Sri Lanka and electrification programs in these areas were virtually non-existent. With the end of hostilities, it can be expected that a significant level of Foreign Direct Investments (FDIs) would flow into the country and the economic growth would accelerate. Such acceleration would increase the demand for power generation and HMP is well placed to capitalise on such opportunities emerging in the sector. Nevertheless, the country may not experience high growth in the short term as the Sri Lankan economy is largely dependent on the global economy which is at present experiencing a downturn. This may in turn hinder the overall growth potential of the power sector, hence, the growth aspirations of the Company.

11.0 INVESTmENT cONSIdERATIONS ANd ASSOcIATEd RISkS


Despite the presence of political hostilities and various economic hardships in the past, the GoSL has been positive on the expansion of the power generation sector and Government policies too have encouraged private sector participation in power generation. Thus, it can be expected that the GoSL may continue to promote private sector participation in power generation in the foreseeable future, especially in the NCRE sector. Therefore, NCRE sector alone gives HMP sufficient space to structure reasonable expansion options.

11.1.3 Changes in the power sector regulations

The Government has traditionally exercised and continues to exercise a significant influence over generation, transmission and distribution of electricity and the power sector could get affected by changes to the Government’s energy policies.

HMP’s operations may be sensitive to any changes in the power sector regulations imposed by GoSL. The Company does not envisage any changes in the near future which may have any adverse material effect on its business prospects and results of operations. However, with regard to Heladhanavi, its PPA protects it from any adverse impacts resulting from changes to power sector regulations.

However, the landscape of the power sector is projected to change in the long run as the Government has already expressed its willingness to deregulate the power sector by passing the Sri Lanka Electricity Act (Act No. 20 of 2009), increased private sector participation can be expected with companies being able to capitalise on new opportunities made available in the sector.

11.1.4 Changes in environmental regulation

HMP strictly complies with all relevant environmental protection laws. Due to the demands of certain pressure groups and environmentalists to protect the environment and curb pollution, new and stricter environmental regulations may perhaps come into existence in the future. If new regulations pertaining to the environment are introduced, the Company may be required to incur costs on compliance. Such additional costs may result in an increase in the cost base and failure to comply with environmental laws may result in penalties and/or fines against the Company, and in the extreme scenario, cessation of its operations. However, with regard to Heladhanavi the PPA protects it from any adverse impacts resulting from changes to environmental regulations.

In addition, HMP is an experienced power producer and has taken due care in carrying out its operations within the regulatory framework and in a socially responsible manner. Therefore, it is believed that HMP would be able to confidently meet if any new regulatory requirements are introduced without jeopardising the Company’s operations.

11.2 Risks Relating to the Company’s Business

11.2.1 Escalating oil prices in the international market

The escalating oil prices in the international markets could have a significant impact on the cost of power generation for all thermal power plants in the country. Despite the cost of fuel being a pass-through under the PPA, Heladhanavi Limited, which operates the 100 MW thermal power plant is required to bear any incremental working capital financing cost arising from the escalation of oil prices. As a result, the finance cost of the Company would increase and performance would be negatively impacted. Thermal power plants including Heladhanavi experienced this effect in the first half of year 2008 when oil prices dramatically increased in the global markets. However, oil prices have since then substantially decreased and remained more stable compared to year 2008. Therefore, a drastic negative impact on the Company’s financing cost is not envisaged in the short to medium term unless sudden hikes in oil prices occur.

On the other hand, oil price hikes lead to increase in avoided cost tariff which is the tariff applicable to Giddawa SHP. Therefore, in a scenario of escalating oil prices Giddawa SHP is likely to benefit thus partially negating negative impact arising from Heladhanavi.

INVESTmENT cONSIdERATIONS ANd ASSOcIATEd RISkS


11.2.2 Fluctuations in weather conditions and changes in water flow may affect the Company’s prospective hydro power generation capacity

HMP is currently operating the 2 MW Giddawa SHP and is planning to develop a 2.4 MW Magal Ganga SHP, increasing its presence in the hydro power sector. The amount of electricity generated by hydro power system is dependent on the available water flow. Giddawa SHP uses water from the river Hulu Ganga and Magal Ganga SHP is expected to use water from the river Magal Ganga for power generation. Power generation is usually high during monsoon times and low during the remainder of the year.

Therefore, prolonged spells of below normal rainfall and/or drought resulting in low or inconsistent water flow will negatively impact generation outputs of hydroelectric power plants including the SHPs of HMP. Furthermore, considerable degree of deforestation has resulted in flash floods in many catchment areas and this may also negatively impact power generation as water flow run-off cannot be sustained as required for optimum hydroelectric generation even if rainfall occurs as expected. However, HMP having obtained services from expert independent hydrologists to conduct the hydrological studies is reasonably confident that expected generation outputs from its hydro power plants can be sustained.

11.2.3 Significant increase in prices or shortage of building materials could increase the construction cost of power plants

The construction of the proposed 2.4 MW SHP at Magal Ganga upper section, in the Kegalle district is expected to commence in the near future. The principal raw materials used in construction of power projects include cement, steel and metal besides equipment such as turbines and generators. The prices and supply of these raw materials and equipment depend on factors which are not within Magal Ganga SHP’s control. These include local and global economic conditions, competition, production levels, transportation costs, taxes and import duties. Drastic price increases or shortages in these equipment and raw materials could affect the ability to develop the proposed power project within its estimated cost and time schedule, thus impacting the overall financial results of the Company. The Company possesses an in-house team of experts who are experienced and are capable of evaluating and identifying measures to minimise the risk of cost overruns and implementation delays. However, it should be noted that the new tariff structure applicable to the Magal Ganga SHP is cost-based. Hence, any increase in the construction costs for small hydro power plants may translate into a higher tariff.

11.2.4 Risk relating to competition in the power generation sector All private sector power generation companies enter into either a SPPA or a PPA which remains valid for a stipulated tenure.

Increased competition in the power generation sector has no bearing on the current operations of HMP’s existing power plants Heladhanavi and Giddawa SHP due to the existence of the PPA and the SPPA. The Magal Ganga SHP is in the process of sourcing the necessary approvals (status of approvals for Magal Ganga SHP is available in Section 7.5.1 of this Prospectus) and therefore is unlikely to be impacted by new competition in the sector. However, in developing greenfield projects and/or acquiring currently operational projects as new investments, the Company may face increased competition due to the growing interest by private sector participants mainly in the NCRE sector. HMP’s experience and operational capabilities acquired through the existing power generation operations, backing of a strong parent (Hemas Holdings PLC), availability of readily investible funds subsequent to the IPO coupled with increased borrowing power and its strong rapport with lending organisations are likely to place the Company in a much stronger position compared to other private sector participants in the future.

11.2.5 Dependency on third parties for the operations

Heladhanavi Limited and Giddawa Hydro Power (Private) Limited, are dependent on the performance of a few suppliers/customers in its normal course of business. Magal Ganga SHP and any new power generation projects to be developed by HMP in the future too will be dependent on few suppliers/customers. Some of the key third parties whom HMP is reliant upon are discussed below.



11.2.5.1 CEB – The sole purchaser of power from Heladhanavi, Giddawa SHP and any other new power plant

Both Heladhanavi and Giddawa SHP are solely reliant on the CEB for the purchase of its energy output. Under the PPA/SPPA, these companies are required to sell the entirety of power generated to the CEB. The financial position of CEB has understandably deteriorated during the past few years due to the high cost of power generation and procurement. Large payments outstanding to the IPPs and high levels of long term loans consist a considerable proportion of the total liabilities of CEB. Any delay in the payments by CEB or the risk of CEB defaulting in payments would have an adverse effect on the business and operations of the Company. However, in the case of Heladhanavi, CEB’s risk of default is largely mitigated by the provisions under the PPA entered into with CEB and the Implementation Agreement (IA) entered into with the GoSL.

With regard to Giddawa SHP, the SPPA entered into with CEB acts as the only recourse to mitigate this risk. This scenario is also applicable to the Magal Ganga SHP and any new SHPs that enters into an SPPA with the CEB.

11.2.5.2 CPC – For the supply of fuel to Heladhanavi

Heladhanavi is fully dependent on the fuel supplied by the Ceylon Petroleum Corporation (CPC) for its operations. The undisrupted supply of fuel is guaranteed through the Fuel Supply Agreement (FSA) signed between CPC and Heladhanavi. The IA also guarantees the performance of CPC in adhering to the obligations imposed by the FSA.

11.2.5.3 Lakdhanavi Limited – For its operations and maintenance of Heladhanavi plant

Under the O&M agreement between Heladhanavi Limited (“Owner”) and Lakdhanavi Limited (“Operator”), the Operator is obliged to provide all day-to-day operation and maintenance services for the facility. The Operator is required to maintain, modify and repair the facility in all material respects in a prudent and efficient manner for the smooth functioning of the power plant. If Operator fails to perform any of its obligations, the provisions of the O&M agreement grant the right to the Owner to perform such obligations and reduce any compensation payable to the Operator. No major risk is envisaged with respect to the performance and maintenance of the plant since Lakdhanavi Limited is the other major shareholder of Heladhanavi Limited.

11.2.6 The Company is required to fulfil its obligations towards the CEB in respect of energy output

Heladhanavi Limited is obliged to supply the Minimum Guaranteed Energy Amount (MGEA) of 698 GWh to CEB each year throughout the ten year term of the PPA. Heladhanavi is liable to pay liquidated damages to CEB in case any substantial shortfall exists. It should be noted that due to the excessive demand, the Heladhanavi plant has been utilised to generate power at a high level during its existence, except in 2006 as explained in Section 7.3.1. With adequate attention being paid with respect to the maintenance of the plant under the O&M agreement with Lakdhanavi as mentioned above, no material risk is envisaged with regard to its operations. However, in a scenario of sharp oil price hikes coupled with considerable delays in payments on the part of CEB, Heladhanavi may find it increasingly difficult to raise the required funds to finance its increased working capital. This may adversely affect the continuous operation of the Heladhanavi power plant.

Giddawa SHP, similar to other small hydro power plants in Sri Lanka, is a “must run” facility under the SPPA and CEB is obliged to purchase all energy output of the plant. Giddawa SHP at the beginning of each year, has to furnish the monthly generation estimates to the CEB. However, it is not liable to pay any penalty to CEB in case of a shortfall in the energy generated.

11.2.7 Post PPA operation

The PPA for Heladhanavi power plant is expected to expire in December 2014. Upon expiration of the term, the Company may have to either negotiate with the CEB for the continuation of the power plant for an extended period under a new PPA or dispose the power plant and terminate the operations in case a new PPA is not entered into. The new/extension of the PPA would depend on the cost competitiveness of Heladhanavi operating its power plant beyond the term of its PPA as CEB is not obliged to renew the PPA for an additional period or to purchase the power plant. Hence, there is a risk that Heladhanavi



would not be able to secure a PPA from CEB or sell energy produced to any other party and would be forced to dispose the plant. It is generally expected that medium speed engines installed at the plant to have a useful life of 25 years with proper maintenance. Initial investigations show existence of a market for used power plants and Heladhanavi would have to access this market should the need arise to dispose of the power plant on the expiry of the PPA. However, it should be noted that at present, Heladhanavi power plant is considered as the most competitive power producer amongst the IPPs operating in Sri Lanka with the lowest tariff (please refer Section 7.6 of this Prospectus). Provided that Heladhanavi power plant is able to sustain a low cost operational profile compared to other options available to the CEB at the time the PPA expires there is a reasonable probability that Heladhanavi power plant will continue to operate beyond the tenure of its PPA subject to mutually accepted terms.

The SPPA of Giddawa SHP carries a tenure of 15 years. At the termination of the SPPA, the right of first refusal is available to CEB on terms identical to those offered by a third party to Giddawa SHP, to purchase any electrical energy generated.

11.2.8 Technical failures

If any technical failures occur in the Company’s power plants, it may be difficult to generate electricity as contracted for. This has a bearing in the case of Heladhanavi as it is obliged to meet the MGEA or the energy requirement of the CEB. This could result in loss of income as well as Heladhanavi having to pay penalties. In the case of Giddawa SHP and Magal Ganga SHP (when operational), this will only result in loss of income. HMP has taken adequate measures to guard against such incidents. With regard to Heladhanavi, electro-mechanical equipment was procured from a top-of-the-range Western European supplier and the plant has been able to operate from the date of commissioning without any unplanned downtime and is a testimony to the reliability of the plant. As mentioned earlier, Operations and Maintenance (O&M) of the plant is carried out by Lakdhanavi Limited, a reputed operator in the industry with vast experience in managing power plants. Lakdhanavi Limited maintains a close rapport with the original equipment suppliers and would be able to promptly resolve any unexpected technical faults. For Giddawa SHP, HMP employed reputed design engineers for engineering designs and an experienced construction firm for civil construction. HMP also used electro-mechanical equipment from a high quality Western European supplier thus minimising the engineering risk in the project. A similar approach would be taken for the development of the Magal Ganga power project.

11.2.9 Natural perils

Despite all the preventive maintenance and precautions undertaken by the Company’s power plants, vulnerability to the risks of natural and manmade disasters always exist. The Company has obtained the required insurance covers to mitigate the risks of damages to property and any business interruptions caused by such disasters.

11.2.10 Tariff revisions

Tariff for Giddawa SHP is computed based on the avoided cost principle as explained in Section 7.4.2. The decline in oil prices would result in a lower avoided cost. Hence, future tariffs relevant for Giddawa SHP may decrease if oil prices continue to decline, subject to a floor of 90% of the tariff which existed at the time Giddawa SHP entered into the SPPA in 2006. However, as HMP maintains a portfolio of thermal and hydro power projects, it is expected to minimise the risk of oil price escalation/decline to an acceptable level. For instance, any negative impact on the overall performance of HMP resulting from a tariff reduction applicable to Giddawa SHP due to the avoided cost being low would be offset by low finance costs at Heladhanavi.

11.2.11 Financial covenant violations

The Syndicate Facility Agreement (SFA) entered into with banks to finance the Heladanavi power project imposed several loan covenants on Heladhanavi such as maintaining certain current and gearing ratios and any dividend payment requiring the prior approval of the syndication (refer Section 7.7.4 for more details). If these covenants are not complied with, the syndication can exercise their claims under the SFA including Heladhanavi’s shares that are pledged under the SFA. Based on the current level of performance and future expectation, no material risk is envisaged with regard to non-compliance of the covenants in terms of the SFA. Further, the syndicated loan is due to be repaid fully in FY 2010/11.



11.2.12 Risks relating to accounting policy changes

The Company and its subsidiaries may from time to time consider changes to accounting policies and methods as and when it may be appropriate. This in turn may have an impact on the recognition of income, expenses, assets and liabilities in the respective financial statements. As a result, the earnings and net asset value of the Company could be affected especially in the year of such change coming into effect.

11.2.13 Capital market related risk

11.2.13.1 No prior market exists for the Offered Shares

Prior to the Offering there has been no public market for the Company’s shares. There can be no assurance that an active trading market for Offered Shares will develop or if developed, will be sustained, or that the market price of Offered Shares shall not decline below the Share Offer Price. The Share Offer Price may not be indicative of the market price for the Company’s Shares after completion of the Offering.

11.2.13.2 Price volatility in the secondary market

The price of the Offered Shares may fluctuate due to and not limited to the following; variations in operating results, changes in operating environment, transitions in the regulatory front, technological advancements/obsolescence, macroeconomic factors and external events. Price of Offered Shares may follow general investor sentiment prevalent in the market at a given time. In addition price of Offered Shares in the market will fluctuate as a result of share trading volumes.



12.1 Articles of Association

Extracts of the Articles of Association of Hemas Power Limited are set out in the Annex B of this Prospectus. Articles of Association of the Company will be available on the website of the CSE, www.cse.lk, Hemas Holdings PLC website www.hemas.com, and the website of the Managers to the Offering www.ndbib.com.

12.2 Inspection of Documents

The Articles of Association, the Auditors’ Report, Audited Financial Statements for the five financial years immediately preceding the date of this Prospectus, FY 2004/05 to FY 2008/09 (both periods inclusive) and other project documents to which references are made in this Prospectus are open for inspection by the public during normal working hours at the Registered Office of the Company during the offer open period.

12.3 Hosting of Prospectus and Application Form on the Web

The Prospectus and Application Form are available on the website of the CSE, www.cse.lk, Hemas Holdings PLC website, www.hemas.com, and the website of the Managers to the Offering, www.ndbib.com, from the date hereof, until the subscription list closes or up to fourteen (14) Market Days, whichever is later.

12.4 Brokerage

Brokerage at the rate of zero decimal seven percentum (0.7%) of the Share Offer Price will be paid in respect of the number of shares allotted/allocated on Applications bearing the seal of any bank operating in Sri Lanka or a member/trading member of the CSE.

12.5 Cost of the Issue

The Directors estimate that the total cost of the Offering including structuring and management fees, fees payable in respect of services rendered by lawyers, accountants, registrars, printing and marketing costs and brokerage commissions will be approximately Rs. 25 Million (at the highest specified price in the Book Build Price Range excluding applicable taxes). Such costs will be recovered from the proceeds of the issue.

12.6 Underwriting

The Offering is not underwritten. The Company shall seek a listing irrespective of whether the Offering is fully subscribed or not for the reasons set out in paragraph below and the Offering is not conditional upon any minimum subscription being met.

The proceeds raised by the Offering are to be utilised by the Company for the activities elaborated under Section 5.4 - Objectives of the Offering. In the opinion of the Directors of the Company, it is estimated that a sum of Rs. 280 Million would be required in order to finance the equity component in relation to the development of already identified projects. In the event of an under subscription, the Company is confident that the shortfall can be financed through internally generated funds and borrowings.

12.0 STATuTORy ANd OTHER gENERAl INfORmATION


The information presented in this section has been extracted from or based on publicly available documents, which have not been prepared or independently verified in connection with the Offering. The information is included for the convenience of investors and is not intended to be a complete description of all information about the Sri Lankan capital market that may be material to investors.

13.1 Governance

The CSE is a duly incorporated legal entity in the form of a Company limited by guarantee. The board of directors of the exchange is the main policymaking body of the exchange and consists of five (05) directors elected by member firms of the CSE and four (04) directors appointed by the Minister of Finance.

The CSE is structured as a self-regulatory organisation and is a member of the World Federation of Exchanges and the South Asian Federation of Exchanges (SAFE). The CSE provides the infrastructure and the regulatory framework required for the trading of listed securities.

A mutualised exchange, the CSE has fifteen (15) members and six (06) trading members. Each member is licensed by the SEC to perform the duties of a stockbroker. All members are corporate entities and, in some cases, subsidiaries of large financial conglomerates such as merchant, commercial and investment banks.

13.2 The Branches of the CSE

The CSE at present operates with a network of four branches in Matara, Kandy, Kurunegala and Negombo.

13.3 Stock Market Indices

The CSE currently maintains two price indices, two total returns indices and 20 sector indices. The All Share Price Index (ASPI) tracks the movement of all listed securities with a base index of 100 set in 1985. The Milanka Price Index (MPI) tracks price changes of 25 selected listed securities based on market capitalisation and liquidity.

In January 2004, the CSE also launched two total return indices designed to reflect both price changes and dividend income, in respect of both price indices. The ASPI calculated on a total returns basis results in the Total Returns Index on the ASPI (ASTRI). The MPI calculated on a total returns basis results in the Total Returns Index on the MPI (MTRI).

13.4 Trading on the CSE

The CSE operates an order driven market using a fully automated screen based trading system and a fully automated clearing and settlement system. Facilities for clearing and settlement of securities are provided by the Central Depository Systems (Private) Limited (CDS) which is a wholly owned subsidiary of the CSE.

13.4.1 Trading Sessions

Trading takes place from 9:30 a.m. to 2:30 p.m. from Monday to Friday, except for Public and Bank Holidays. The trading session is divided into the following sessions.

Pre-Open During pre-open (9.00 a.m. to 9.30 a.m.), the system accepts orders. These orders can be amended and cancelled during

pre-open. However, no trades take place during this stage. Orders during this period are held in the Automated Trading System (ATS) and will be forwarded to the execution engine at open auction time.

13.0 THE cOlOmbO STOck ExcHANgE


Open Auction During open auction (9.30 a.m.), the system temporarily closes the order book and starts matching orders. It establishes

the opening price and determines the orders to be executed according to the rules for the open auction period.

Regular Trading During regular trading (9.30 a.m. to 2.30 p.m.), new orders are continually matched to existing orders in the order book. If

an order cannot be executed, it may be stored in the order book, depending on the type of the order.

13.4.2 Size of Trades

The number of shares traded must be in multiples of one hundred and any number less than this will be traded on the Odd Lot board.

13.4.3 Settlement Procedures

Equity transactions are settled on a T+3 time frame for both the buyers and sellers. All parties wishing to trade on the CSE must have CDS accounts.

13.4.4 Transaction Costs

For transactions up to Rs. 1.0 Million, a total transaction cost of one decimal four two five percentum (1.425%) is charged on both the buyer and the seller of a transaction. If the value of the trade was higher than Rs. 1.0 Million, a transaction cost of one decimal two two five percentum (1.225%) would be charged.

The transaction cost break up is depicted in Table 13-1 and Table 13-2 below.

Table 13-1 : Transaction Costs

On transactions up to Rs. 1.0 Million On transactions over Rs. 1.0 MillionBrokerage Fees 1.000% Brokerage Fees 0.800%SEC Cess 0.090% SEC Cess 0.090%CSE Fees 0.105% CSE Fees 0.105%CDS Fees 0.030% CDS Fees 0.030%Share Transaction Levy 0.200% Share Transaction Levy 0.200%

Total 1.425% Total 1.225% Source: Based on Colombo Stock Exchange

Brokerage fees are negotiable for transactions over Rs. 100 Million, subject to a minimum brokerage of 0.1%.

Table 13-2 : Transaction Costs for Negotiable Transactions

On transactions over Rs. 100 Million

Brokerage Fees (Negotiable) 0.1000%(minimum)

SEC Cess 0.0450%CSE Fees 0.0525%CDS Fees 0.0150%Share Transaction Levy 0.2000%

Source: Based on Colombo Stock Exchange

THE cOlOmbO STOck ExcHANgE


With effect from February 15, 2006, the transaction fee due to the broker, CSE, CDS and SEC on intraday trades, where a client buys and sells or sells and buys the same security on the same day through the same broker will not be charged on one side of the transaction involving lower of the quantity.

13.4.5 Recent Performance

The Colombo Bourse witnessed increased activity from the year 2004 to year 2008 with average daily turnover increasing from Rs. 246 Million to Rs. 464 Million. During the year 2005 the CSE registered its highest annual turnover of Rs. 114.6 Billion and has been over Rs. 100 Billion for each year thereon. Net foreign inflows have also risen steadily with the highest level being recorded in the year 2008. The listing of large capitalised stocks with sound fundamentals and solid yields influenced the record inflow of foreign portfolio investment with increased liquidity and depth of the market. Despite increased turnover, investor perception suffered several setbacks during the year 2008 as a result of the fragile political climate and developments in the war front prevailing at that time. The rising interest rate environment enticed prospective investors towards Government securities and fixed deposits further to the detriment of the equity market. Consequently, the ASPI and the MPI lost 40.9% and 50.4% respectively during the year 2008.

During the latter part of 2008 and beginning of the year 2009, the Market was further impacted by trickling down effects of global economic turmoil. However, market performance gradually hit a slow but encouraging upward trend with both performance indices recording positive momentum. Following the end of hostilities in the North and East in May 2009, the CSE has performed with a new lease of life. The market indices ASPI and MPI have recorded an impressive 61.8% and 66.8% YTD growth respectively. Foreign activity which has been lacklustre in the first quarter of 2009 improved to 33% of total turnover despite foreigners being net sellers at end of June 2009.

IPO activity during the period 2004 to date has amounted to Rs. 17.45 Billion being raised in the market, with majority of these having been effected during the year 2005 and 2006. IPO activity during the year 2007 and 2008 was marginal due to weaker investor sentiment.

Although present explosive market momentum may not continue in the long run, sustainable growth in the CSE performance can be perceived. Improved market performance coupled with positive sentiment among investors and likely improvements in the economy following the end of the war in North and East will provide a stronger platform for new issues.

The table below provides market related statistics for the years 2003 to 2008 and six months period ended June 2009.

Table 13-3 : Stock Market Statistics 2004 – June 2009

Period Y/E 2004 Y/E 2005 Y/E 2006 Y/E 2007 Y/E 2008 Jan - June 2009

Cumulative Turnover, Rs. Mn 59,052 114,599 105,154 104,985 110,454 49,579 Average Daily Turnover, Rs. Mn 246 482 436 436 464 427 Cumulative Trades, No. 645,083 1,100,451 952,382 876,928 776,244 490,847 Listed Companies, No. 242 239 237 235 235 234 Foreign Turnover/Total Turnover as % 18 22 33 39 54 33 Net Foreign Flow, Rs. Mn 1,106 6,145 5,377 11,254 13,951 (477)Cumulative Foreign Purchases, Rs. Mn 11,278 27,712 37,167 46,797 66,632 15,892 Cumulative Foreign Sales, Rs. Mn 10,172 21,568 31,790 35,543 52,682 16,373 CSE All Share Price Index 1,507 1,922 2,722 2,541 1,503 2,432 CSE Milanka Price Index 2,074 2,451 3,712 3,292 1,631 2,722 Market Price Earning Ratio (PER) 10.8 12.4 14.0 11.6 5.4 9.9 Market Dividend Yield % 3.2 2.7 2.2 2.5 5.6 3.9 Source: Based on Colombo Stock Exchange Fact Book 2008 and Monthly Market Reports



13.5 Foreign Investment in Sri Lankan Capital Market

Foreign investment in local equity is open to the following parties;

Country funds approved by the SEC

Regional funds approved by the SEC

Corporate bodies incorporated outside Sri Lanka, and

Individuals resident outside Sri Lanka (inclusive of Sri Lankans resident outside Sri Lanka).

Foreign investors should refer Section 5.13.4 for details pertaining to foreign currency remittance. 13.6 Foreign Investment Restrictions

Foreign investors may invest in up to 100% of ordinary share capital of a public limited liability company in Sri Lanka subject to certain limitations and restrictions. Please refer Section 14.9 for more details with regard to exchange controls.



The following information is an overview of selected taxation and other regulations that may be relevant to the Company and potential investors with regard to share transactions in the Democratic Socialist Republic of Sri Lanka. The discussion does not claim to be a comprehensive explanation of regulations and considerations that pertain to the purchase, ownership and disposition of the Offered Shares. The explanations are based on provisions effective in Sri Lanka at the time of printing of this Prospectus. Investors are advised to consult their own advisors prior to engaging in transactions related to the Offering.

14.1 Corporate Taxation

Details of BOI Status and Tax position of HMP Group companies are available under Section 7.7.1 of this Prospectus.

14.2 Withholding Tax (WHT) for Dividends

In general, dividends distributed by resident companies out of taxable income to resident or non-resident shareholders are subject to WHT at the rate of 10%. The Company is required to deduct dividend tax at source and remit the same to the Department of Inland Revenue.

Other than the WHT referred to above, dividends paid on shares to shareholders of the Company will not be subject to any other Sri Lankan tax. Dividend income received by a company resident in Sri Lanka from another company resident in Sri Lanka does not form part of statutory income and, is therefore, not taxable in the hands of the recipient company.

In the case of Heladhanavi Limited WHT can be claimed from CEB.

14.3 Economic Service Charge (ESC)

Companies are able to claim ESC against income tax liability. Unclaimed ESC can be carried forward only for 5 years.

HMP is liable to pay ESC at the rate of 0.5% as the profits and income of the Company is chargeable at income tax rate specified in Part ‘A’ of the second schedule to the Inland Revenue Act No. 10 of 2006.

Giddawa Hydro Power (Private) Limited is liable to pay at the rate of 0.25% due to its eligibility for BOI tax exemptions.

Heladhanavi Limited is liable to pay ESC at the rate of 0.25% due to its eligibility for BOI tax exemptions. However, this item also can be claimed from CEB.

14.4 Taxation of Share Transactions

A transaction tax of 0.2% on the sale and purchase of all share transactions is being charged since January 1, 2005. This tax is part of the transaction cost charged when trading shares on the CSE. Further details of transaction costs related to trading on the CSE are given under Section 13.4.4 of this Prospectus.

14.5 Stamp Duty

The Company is liable to pay Stamp Duty at 0.5% for the Offering and on any new shares that may be issued in future in line with current Stamp Duty regulations.

14.6 Remittance Tax

Every non-resident company is liable to pay tax on remittances amounting to 10% of its remittances abroad. Remittances do not include any dividends paid by a resident company to such non-resident company.

14.0 TAxATION ANd ExcHANgE cONTROlS


14.7 Value Added Tax

In line with the first schedule of the VAT Amendment Act No. 14 of 2007 electricity generation is a VAT exempted activity and hence input VAT is considered as a cost. This is applicable to the Group’s power generating companies Heladhanavi Limited and Giddawa Hydro Power (Private) Limited. However, in the case of Heladhanavi Limited input VAT can be claimed from CEB.

HMP as the Group’s holding company generates its income through dividends from subsidiaries. Dividend income is exempted from VAT as per the VAT (Amendment) Act No. 13 of 2004.

14.8 Nation Building Tax

In line with NBT Act No.9 of 2009 electricity generation is exempted for NBT. In addition venture capital activities also are exempted for NBT. Resultantly HMP, Heladhanavi Limited and Giddawa Hydro Power (Private) Limited are exempted for NBT.

14.9 Exchange Controls

Dividends to foreign shareholders, including non-resident Sri Lankan shareholders, can be remitted without restriction. Proceeds from the sale of shares too can be remitted without exchange control restrictions if the funds for purchase of the said shares have been effected through a SIERA or a RANSI. The operations of both the SIERA and RANSI are governed by the rules and regulations of the Controller of Exchange.

All funds for purchase cost, brokering and bank charges including inward remittances and repatriation of dividends and all credits, sale proceeds and dividend proceeds should be channelled through the SIERA/RANSI. Remittances to SIERA/RANSI should be backed by documentary evidence of the transaction, giving rise to the said remittance (i.e. dividend warrant, contract note). Such documentation should be produced to the commercial bank at which the respective SIERA/RANSI is held. A tax clearance certificate from the Department of Inland Revenue is not required for remittances in respect of remittance of dividends and sale proceeds of shares held in listed companies.

TAxATION ANd ExcHANgE cONTROlS


15.1 Statutory Declaration by the Directors

August 25, 2009

We the undersigned, who are named in the Prospectus as Directors of Hemas Power Limited, hereby declare and confirm that we have read the provisions of the CSE listing rules and of the Companies Act No. 07 of 2007 and any amendments to it relating to the issue of this Prospectus and those provisions have been complied with.

This Prospectus has been seen and approved by us and we collectively and individually accept full responsibility for the accuracy of the information given and confirm that after making all reasonable enquires and to the best of our knowledge and belief, there are no other facts the omission of which would make any statement herein misleading or inaccurate. Where representations regarding the future performance of Hemas Power Limited have been given in the Prospectus, such representations have been made after due and careful enquiry of the information available to Hemas Power Limited and making assumptions that are considered to be reasonable at the present point in time in our best judgement.

Name Designation SignatureMr. Husein Esufally Chairman Sgd.Prof. Malik Ranasinghe Independent Director Sgd.Mr. Sanjiva Senanayake Independent Director Sgd.Mr. Imtiaz Esufally Non-Executive Director Sgd.Mr. Riad Ameen Non-Executive Director Sgd.Mr. Malinga Arsakularatne Non-Executive Director Sgd.Mr. Kishantha Nanayakkara Managing Director Sgd.

15.2 Statutory Declaration by the Managers to the Offering

August 26, 2009

We, NDB Investment Bank Limited, of No. 40, Navam Mawatha, Colombo 02 being the Manager to the Initial Public Offering of Hemas Power Limited, hereby declare and confirm to the best of our knowledge and belief the Prospectus constitutes full and true disclosure of all material facts about the Offering and Hemas Power Limited, whose Ordinary Shares are being issued.

The Common Seal of NDB Investment Bank Limited of Sri Lanka affixed on this 26th day of August 2009 at Colombo in the presence of Mr. Vajira Kulatilaka (Director/Chief Executive Officer) and Mr. Ajith Wickremaratne (Director).

Sgd. Sgd. Director/Chief Executive Officer Director

15.3 Statutory Declaration by the Company

August 25, 2009

An application has been made to the Colombo Stock Exchange for permission to deal in and for a listing for all of the Ordinary Shares issued by the Company and those Ordinary Shares which are the subject of this Offering. Such permission will be granted when the Company has been admitted to the official list of the Colombo Stock Exchange. The Colombo Stock Exchange assumes no responsibility for the correctness of any of the statements made or opinions expressed or reports included in this Prospectus. Admission to the official list is not to be taken as an indication of the merits of the Company or of the securities issued.

The Common Seal of Hemas Power Limited of Sri Lanka affixed on this 25th day of August 2009 at Colombo in the presence of Mr. Husein Esufally (Chairman) and Mr. Kishantha Nanayakkara (Managing Director).

Sgd. Sgd. Chairman Managing Director

15.0 STATuTORy dEclARATIONS


16.1 Accountants’ Report for Inclusion in the Prospectus

16.0 fINANcIAl STATEmENTS ANd AudITORS’ REPORT

ASMI/SK

The Board of Directors Hemas Power Limited 36, Bristol Street,Colombo 1.

Dear Sirs,

ACCOUNTANTS’ REPORT FOR INCLUSION IN THE PROSPECTUS OF HEMAS POWER LIMITED (FORMERLY KNOWN AS HEMAS POWER (PVT) LIMITED)

INTRODUCTION

This report has been prepared for the inclusion in the prospectus issued in connection with the initial public offering of 31,300,000 Ordinary Shares each at the Share Offer Price to be decided in terms of section 5.10 of this prospectus.

We have examined the financial statements of the Hemas Power (Pvt) Limited (the ‘Company’) and the consolidated financial statements of the Company and its jointventure/subsidiaries (the ‘Group’) and report as follows:

1. INCORPORATION

The Company was incorporated in Sri Lanka on 11th June 2003 as a limited liability Company under the Companies Act No. 17 of 1982, with the objective of investing in power generating companies.

The Company had got approval on its application to the Registrar of Companies to change its status to a public limited liability company on 8th June 2009 under section 11(1) of the Companies Act No. 7 of 2007. In accordance to the certificate issued by the Registrar of Companies dated 29th July 2009 Hemas Power (Pvt) Limited as thereon, changed its name to Hemas Power Limited.

2. FINANCIAL STATEMENTS

2.1 Five-Year Summary of Audited Financial Statements

A summary of audited Income Statements, Balance Sheets, Statements of Changes in Equity and Cash Flow Statements of Hemas Power (Pvt) Ltd for the financial years ended 31st March 2005 to 31st March 2009, based on the audited financial statements are set out on pages 74 to 78 of the Prospectus.


2.2 Audited Financial Statements for the year ended 31 March 2009

Our audit report on the financial statements for the year ended 31st March 2009 together with such financial statements comprising the balance sheet and income statement, statement of changes in equity and cash flow statement along with the accounting policies and notes thereon is given on page 79 to 101 of the Prospectus.

2.3 Audit Reports

We have audited the financial statements of the Company and the Group for the periods ended 31st March 2005 to 31st March 2009. Unqualified audit opinions have been issued for the said financial years.

2.4 Accounting Policies

The financial statements of the Company and the Group for the periods ended 31st March 2005 to 31st March 2009 comply with the Sri Lanka Accounting Standards.

The accounting policies of the Company and the Group are stated in detail in the audited financial statements of Hemas Power (Pvt) Limited and its subsidiaries for the year ended 31st March 2009. During this period, there were no material changes in the accounting policies of the Group.

2.5 Dividends

The Company declared dividends in respect of Ordinary Shares in the Company in the following financial years

Year Net Dividends declared(Rs)

Dividend per share(Rs)

2007 54,000,000 0.672008 89,999,995 1.122009 101,647,060 1.08

2.6 Events Occurring After the Balance Sheet Date

Company has paid a dividend of Rs. 93,176,471 on 1st July 2009, which resulted in a Dividend per Share of Rs.0.99.

Yours faithfully,

ColomboAugust 7, 2009

fINANcIAl STATEmENTS ANd AudITORS’ REPORT


16.2 Five Year Summary of Financial Statements16.2.1 Summary Income Statements and Balance Sheets

FIVE

YEA

R SU

MMAR

YYe

ar E

nded

31st

March

(Aud

ited)

Gr

oup

Com

pany

20

09

2008

20

07

2006

20

05

2009

20

08

2007

20

06

2005

Rs.

Rs.

Rs.

Rs.

Rs.

Rs.

Rs.

Rs.

Rs.

Rs

A) S

umm

ary o

f the

Ope

ratio

ns

Turno

ver

4,868

,559,6

64

4,966

,160,1

60

3,667

,242,2

30

2,924

,948,8

05

1,402

,257,7

12

101,6

47,06

0 89

,999,9

95

54,00

0,000

-

-Gr

oss P

rofit

573,6

38,04

6 59

6,552

,779

578,2

66,61

9 53

5,351

,232

261,1

11,33

6 10

1,647

,060

89,99

9,995

54

,000,0

00

- -

Net P

rofit b

efore

Finan

ce C

ost

481,5

46,82

1 55

2,285

,677

522,8

76,59

9 48

3,007

,826

215,9

27,57

1 82

,641,0

78

147,3

70,42

2 55

,719,5

07

(6,72

7,504

) (7,

193,1

39)

Profi

t befo

re Ta

xatio

n 23

0,135

,033

294,5

32,13

7 30

4,066

,375

255,7

33,25

1 10

9,514

,224

74,14

6,219

13

8,308

,765

55,14

2,902

(6,

999,6

60)

(7,19

3,187

)Ta

xatio

n 9,9

72

(29,29

9) -

- (20

,567)

- -

- -

-Pr

eferen

ce D

ividen

ds

7,327

,226

7,565

,081

10,00

2,740

11

,753,4

26

5,950

,686

- -

- -

-Pr

ofit A

ttribu

table

to Sh

areho

lders

222,8

17,77

9 28

6,937

,757

294,0

63,63

5 24

3,979

,825

103,5

42,97

1 74

,146,2

19

138,3

08,76

5 55

,142,9

02

(6,99

9,660

) (7,

193,1

87)

B) S

umm

ary o

f Fina

ncial

Pos

ition

Capit

al an

d Res

erves

Stated

Cap

ital

939,0

00,02

0 93

9,000

,020

802,0

00,02

0 80

2,000

,020

438,0

00,02

0 93

9,000

,020

939,0

00,02

0 80

2,000

,020

802,0

00,02

0 43

8,000

,020

Prefe

rence

Share

Cap

ital

99,62

7,453

59

,313,7

27

75,00

0,000

91

,666,6

67

262,0

00,00

0 -

- -

- 16

2,000

,000

Rese

rves

245,8

10,02

9 16

6,506

,588

77,72

6,280

82

,203,0

21

112,2

93,06

8 -

- -

- -

Retai

ned E

arning

s 51

1,154

,280

503,3

14,87

2 42

7,190

,123

274,4

90,09

2 66

,994,2

62

3,452

,715

30,95

3,556

(17

,355,2

14)

(18,49

8,116

) (11

,498,4

56)

Total

Equit

y 1,7

95,59

1,782

1,6

68,13

5,207

1,3

81,91

6,423

1,2

50,35

9,800

87

9,287

,350

942,4

52,73

5 96

9,953

,576

784,6

44,80

6 78

3,501

,904

588,5

01,56

4

Asse

ts an

d Liab

ilities

Curre

nt As

sets

1,351

,330,4

85

1,555

,912,4

28

1,296

,773,9

56

1,063

,221,1

53

883,7

87,26

4 33

5,662

,263

301,7

80,02

9 90

,692,9

76

203,7

80,75

0 1,0

25,88

0Cu

rrent

Liabil

ities

1,529

,734,5

19

1,600

,309,0

42

1,376

,652,9

39

967,7

76,14

8 99

8,971

,715

2,321

,980

9,660

,318

50,01

1,282

40

,645,4

96

14,78

7,006

Net C

urren

t Ass

ets

(178,4

04,03

4) (44

,396,6

14)

(79,87

8,983

) 95

,445,0

05

(115,1

84,45

1) 33

3,340

,283

292,1

19,71

1 40

,681,6

94

163,1

35,25

4 (13

,761,1

26)

Prop

erty,

Plant

and E

quipm

ent

2,352

,780,4

34

2,343

,645,5

93

2,494

,017,2

58

2,638

,642,8

49

2,834

,366,8

72

18,42

5,882

1,7

25,22

9 93

6,552

1,7

85,28

0 2,3

89,94

0Ot

her N

on C

urren

t Ass

ets

20,40

5,018

17

0,838

,608

143,3

66,91

0 42

,933,3

20

- 62

2,712

,610

773,1

46,20

0 74

3,462

,810

642,9

33,32

0 60

0,000

,000

Non C

urren

t Liab

ilities

(39

9,189

,636)

(801,9

52,38

0) (1,

175,5

88,76

2) (1,

526,6

61,37

4) (1,

839,8

95,07

1) (32

,026,0

40)

(97,03

7,564

) (43

6,250

) (24

,351,9

50)

(127,2

50)

Net A

ssets

1,7

95,59

1,782

1,6

68,13

5,207

1,3

81,91

6,423

1,2

50,35

9,800

87

9,287

,350

942,4

52,73

5 96

9,953

,576

784,6

44,80

6 78

3,501

,904

588,5

01,56

4

Finan

cial R

atios

Earni

ngs p

er Sh

are

(LKR)

2.3

7 3.5

8 3.6

7 3.9

4 5.2

6 0.7

8 1.7

2 0.6

8 (0.

11)

(0.36

)Ne

t Ass

ets pe

r Sha

re (LK

R)

18.06

17

.13

16.30

14

.45

14.09

10

.04

10.33

9.7

8 9.7

7 9.8

1Div

idend

per S

hare

- Ordi

nary

(LKR)

1.0

8 1.1

2 0.6

7 -

- 1.0

8 1.1

2 0.6

7 -

-Cu

rrent

Ratio

(Ti

mes)

0.88

0.97

0.94

1.10

0.88

144.5

6 31

.24

1.81

5.01

0.07

........

........

........

........

.......

Finan

ce O

fficer

The a

bove

summ

arise

d fina

ncial

infor

matio

n and

its ex

tracti

on fr

om au

dited

finan

cial s

tatem

ents,

is th

e res

pons

ibility

of th

e Boa

rd of

Dire

ctors.

........

........

........

........

.......

........

........

........

........

.......

Dire

ctor

Dire

ctor

Colom

bo7,

Augu

st 20

09



He

mas

Pow

er (P

rivat

e) L

imite

d

STAT

EMEN

T OF

CHA

NGES

IN E

QUIT

Y

Pr

efer

ence

Stat

ed

Shar

e Re

serv

es

Reta

ined

To

tal

Ca

pita

l Ca

pita

l

Earn

ings

Gr

oup

Rs.

Rs.

Rs.

Rs.

Rs.

Balan

ce as

at 1

April

2004

20

8,000

,020

492,0

00,00

0 -

(5,25

7,506

) 69

4,742

,514

Issue

d/(Re

deem

ed) f

or C

ash

230,0

00,00

0 (2

30,00

0,000

) -

- -

Net P

rofit

for th

e Yea

r -

- -

109,4

93,65

7 10

9,493

,657

Divid

end -

Pre

feren

ce S

hare

s -

- -

(5,95

0,686

) (5

,950,6

86)

Tran

sferre

d to/f

rom

durin

g the

Year

-

- 11

2,293

,068

(31,2

91,20

3)

81,00

1,865

Balan

ce as

at 31

Mar

ch 20

05

438,0

00,02

0 26

2,000

,000

112,2

93,06

8 66

,994,2

62

879,2

87,35

0

Balan

ce as

at 1

April

2005

43

8,000

,020

262,0

00,00

0 11

2,293

,068

66,99

4,262

87

9,287

,350

Proc

eeds

from

new

Shar

e Iss

ue

364,0

00,00

0 -

- -

364,0

00,00

0Re

demp

tion o

f Pre

feren

ce S

hare

s -

(162

,000,0

00)

- -

(162

,000,0

00)

Net P

rofit

for th

e Yea

r -

- -

255,7

33,25

1 25

5,733

,251

Rede

mptio

n of P

refer

ence

Sha

res

- (8

,333,3

34)

- -

(8,33

3,334

)Di

viden

ds -

Prefe

renc

e Sha

res

- -

- (11

,753,4

25)

(11,75

3,425

)Tr

ansfe

rred t

o/fro

m du

ring t

he Ye

ar

- -

(30,0

90,04

7)

(36,4

83,99

6)

(66,5

74,04

3)

Balan

ce as

at 31

Mar

ch 20

06

802,0

00,02

0 91

,666,6

67

82,20

3,022

27

4,490

,093

1,250

,359,8

01

16.2.2 Summary Statements of Changes of Equity (Group)



He

mas

Pow

er (P

rivat

e) L

imite

d

STAT

EMEN

T OF

CHA

NGES

IN E

QUIT

Y

Pr

efer

ence

Stat

ed

Shar

e Re

serv

es

Reta

ined

To

tal

Ca

pita

l Ca

pita

l

Earn

ings

Gr

oup

Rs.

Rs.

Rs.

Rs.

Rs.

Balan

ce as

at 1

April

2006

80

2,000

,020

91,66

6,667

82

,203,0

22

274,4

90,09

3 1,2

50,35

9,801

Net P

rofit

for th

e Yea

r -

- -

304,0

66,37

5 30

4,066

,375

Rede

mptio

n of P

refer

ence

Sha

res

- (1

6,666

,667)

-

- (1

6,666

,667)

Divid

ends

- Pr

efere

nce S

hare

s -

- -

(10,0

02,74

0)

(10,0

02,74

0)Di

viden

ds -

Ordin

ary S

hare

s -

- -

(54,0

00,00

0)

(54,0

00,00

0)Tr

ansfe

rred t

o/fro

m du

ring t

he Ye

ar

- -

(4,47

6,741

) (8

7,363

,604)

(9

1,840

,345)

Balan

ce as

at 31

Mar

ch 20

07

802,0

00,02

0 75

,000,0

00

77,72

6,281

42

7,190

,123

1,381

,916,4

24

Balan

ce as

at 1

April

2007

80

2,000

,020

75,00

0,000

77

,726,2

81

427,1

90,12

3 1,3

81,91

6,424

Proc

eeds

from

New

Sha

re Is

sue

137,0

00,00

0 -

- -

137,0

00,00

0Ad

justm

ent in

Res

pect

of Gr

oup H

olding

-

- -

(65,5

08,51

8)

(65,5

08,51

8)Ne

t Pro

fit for

the Y

ear

- -

- 29

4,502

,838

294,5

02,83

8Re

demp

tion o

f Pre

feren

ce S

hare

s -

(15,6

86,27

3)

- -

(15,6

86,27

3)Di

viden

ds -

Prefe

renc

e Sha

res

- -

- (7

,565,0

81)

(7,56

5,081

)Di

viden

ds -

Ordin

ary S

hare

s -

- -

(89,9

99,99

5)

(89,9

99,99

5)Tr

ansfe

rred t

o/fro

m du

ring t

he Ye

ar

- -

88,78

0,308

(5

5,304

,495)

33

,475,8

12Ba

lance

as at

31 M

arch

2008

93

9,000

,020

59,31

3,727

16

6,506

,589

503,3

14,87

2 1,6

68,13

5,207

Balan

ce as

at 1

April

2008

93

9,000

,020

59,31

3,727

16

6,506

,589

503,3

14,87

2 1,6

68,13

5,207

Net P

rofit

for th

e Yea

r -

- -

230,1

45,00

4 23

0,145

,004

Capit

aliza

tion o

f Res

erve

s -

- -

- -

Rede

mptio

n of P

refer

ence

Sha

res

- (1

5,686

,273)

-

- (1

5,686

,273)

Issue

of P

refer

ence

Sha

res

- 56

,000,0

00

- -

56,00

0,000

Divid

ends

- Pr

efere

nce S

hare

s -

- -

(7,32

7,226

) (7

,327,2

26)

Divid

ends

- Or

dinar

y Sha

res

- -

- (1

01,64

7,060

) (1

01,64

7,060

)Tr

ansfe

rred t

o/fro

m du

ring t

he Ye

ar

- -

79,30

3,441

(11

3,331

,311)

(3

4,027

,870)

Balan

ce as

at 31

Mar

ch 20

09

939,0

00,02

0 99

,627,4

53

245,8

10,02

9 51

1,154

,280

1,795

,591,7

82



16.2.3 Summary Statements of Changes of Equity (Company)

Hemas Power (Private) Limited STATEMENT OF CHANGES IN EQUITY

Company Stated Preference Retained Total Capital Share Capital Earnings/ (Losses) Rs. Rs. Rs. Rs.

Balance as at 1 April 2004 208,000,020 392,000,000 (4,305,269) 595,694,751Issued/(Redeemed) for Cash 230,000,000 (230,000,000) - -Net Loss for the Year - - (7,193,187) (7,193,187)Balance as at 31 March 2005 438,000,020 162,000,000 (11,498,456) 588,501,564

Balance as at 1 April 2005 438,000,020 162,000,000 (11,498,456) 588,501,564Proceeds from New Share Issue 364,000,000 - - 364,000,000Redemption of Preference Shares - (162,000,000) - (162,000,000)Profit for the Year - - (6,999,660) (6,999,660)Balance as at 31 March 2006 802,000,020 - (18,498,116) 783,501,904

Balance as at 1 April 2006 802,000,020 - (18,498,116) 783,501,904Profit for the Year - - 55,142,902 55,142,902Dividend Paid - 2005 - - (54,000,000) (54,000,000)Balance as at 31 March 2007 802,000,020 - (17,355,214) 784,644,806

Balance as at 1 April 2007 802,000,020 - (17,355,214) 784,644,806Proceeds from New Share Issue 137,000,000 - - 137,000,000Profit for the Year - - 138,308,765 138,308,765Dividend Paid - 2006 - - (89,999,995) (89,999,995)Balance as at 31 March 2008 939,000,020 - 30,953,556 969,953,576

Balance as at 1 April 2008 939,000,020 - 30,953,556 969,953,576Profit for the Year - - 74,146,219 74,146,219Dividend Paid - 2008 - - (101,647,060) (101,647,060)Balance as at 31 March 2009 939,000,020 - 3,452,715 942,452,735



16.2.4 Summary Cash Flow Statements

Hem

as P

ower

(Priv

ate)

Lim

ited

CASH

FLO

W S

TATE

MENT

Gr

oup

Com

pany

20

09

2008

20

07

2006

20

05

2009

20

08 20

07

2006

20

05

Rs

. Rs

. Rs

. Rs

. Rs

. Rs

. Rs

. Rs

. Rs

. Rs

.

Cash

Gene

rated

from

Opera

tions

833,3

18,24

6 48

0,001

,548

374,1

05,88

3 70

7,026

,883

42,51

8,886

(14

3,398

,531)

(175,5

44,46

4) (10

8,077

,826)

15,42

8,082

(1,

191,9

17)

Int

erest P

aid

(251,4

11,78

8) (25

7,753

,540)

(218,8

10,22

4) (22

7,274

,575)

(106,4

13,34

8) (8,

494,8

59)

(9,06

1,657

) (57

6,605

) (27

2,156

) (48

)Ne

t Cas

h from

/(Use

d in)

Opera

ting A

ctivit

ies

581,9

06,45

8 22

2,248

,008

155,2

95,65

9 47

9,752

,308

(63,89

4,462

) (15

1,893

,390)

(184,6

06,12

1) (10

8,654

,431)

15,15

5,926

(1,

191,9

65)

Cash

Flow

s from

/(Use

d in)

Inves

ting A

ctivit

ies

Acqu

isition

of Pr

opert

y, Plan

t and

Equip

ment

(196,6

28,11

3) (17

9,727

,438)

(54,26

7,899

) (67

1,900

) (63

9,104

,107)

(19,20

0,590

) (1,

698,7

00)

(2,47

3,402

) (19

7,000

) (95

,380)

Pro

ceeds

from

Sale o

f Prop

erty, P

lant a

nd Eq

uipme

nt -

1,549

,375

2,455

,000

25,20

0 -

- -

2,455

,000

2,300

-

Ac

quisit

ion of

Inves

tmen

ts -

(50,00

0,000

) (10

0,433

,590)

(42,93

3,320

) -

- (72

,616,7

10)

(100,5

29,49

0) (42

,933,3

20)

-

Loss

on Gr

oup S

hare

Holdin

g Cha

nge

- (18

,149,5

50)

- -

- -

- -

- -

Pro

ceeds

from

Sale o

f Inves

tmen

ts 15

0,433

,590

103,0

29,38

0 -

- -

150,4

33,59

0 10

3,029

,381

- -

-

Good

will P

aid fo

r Acqu

istion

of Su

bsidia

ries

- (20

,405,0

18)

- -

- -

- -

- -

Div

idend

Recei

ved

- -

- -

- 10

1,647

,060

89,99

9,995

54

,000,0

00

- -

Int

erest R

eceive

d 13

,903,8

97

29,83

6,496

23

,909,5

19

5,474

,413

148,1

00

1,884

,039

1,059

,233

14,35

5,824

1,3

40,58

2 14

8,100

Net C

ash F

lows/(

Used

in) In

vesti

ng Ac

tivitie

s (32

,290,6

26)

(133,8

66,75

5) (12

8,336

,971)

(38,10

5,607

) (63

8,956

,007)

234,7

64,09

9 119

,773,1

99

(32,19

2,068

) (41

,787,4

38)

52,72

0

Cash

Flow

s from

/(Use

d in)

Finan

cing A

ctivit

ies

Rede

mption

of Pr

eferen

ce Sh

ares

(15,68

6,273

) (15

,686,2

73)

(16,66

6,667

) (16

2,000

,000)

- -

- -

(162,0

00,00

0) -

Pro

ceeds

from

Issue

of Or

dinary

Share

s -

137,0

00,00

0 -

364,0

00,00

0 -

- 13

7,000

,000

- 36

4,000

,000

-

Procee

ds fro

m Iss

ue of

Prefe

rence

Share

s 56

,000,0

00

- -

- -

- -

- -

-

Procee

ds fro

m Int

erest B

earin

g Loa

ns an

d Borr

owing

s 50

9,935

,271

96,40

7,564

-

24,09

0,783

49

9,654

,859

60,25

0,000

96

,407,5

64

- 24

,090,7

83

-

Repa

ymen

t of In

terest

Beari

ng Lo

ans a

nd Bo

rrowin

gs (87

6,412

,458)

(437,2

84,73

1) (42

8,043

,389)

(251,4

39,30

4) (5,

000,0

00)

(125,4

07,56

4) -

- -

-

Divide

nds P

aid - P

refere

nce Sh

ares

(7,32

7,226

) (7,

565,0

81)

(10,00

2,740

) (11

,753,4

25)

(5,95

0,685

) -

- -

- -

Div

idend

s Paid

- Ordi

nary

Share

s (10

1,647

,060)

(89,99

9,995

) (54

,000,0

00)

- -

(101,6

47,06

0) (89

,999,9

95)

(54,00

0,000

) -

-Ne

t Cas

h Flow

s from

/(Use

d) in

Finan

cing A

ctivit

ies

(435,1

37,74

6) (31

7,128

,517)

(508,7

12,79

6) (37

,101,9

46)

488,7

04,17

4 (16

6,804

,624)

143,4

07,56

9 (54

,000,0

00)

226,0

90,78

3 -

Net In

creas

e/(De

creas

e) in

Cash

and C

ash E

quiva

lents

114,47

8,086

(22

8,747

,264)

(481,7

54,10

7) 40

4,544

,755

(214,1

46,29

5) (83

,933,9

14)

78,57

4,647

(19

4,846

,499)

199,4

59,27

1 (1,

139,2

45)

Cash

and C

ash Eq

uivale

nts at

the B

eginn

ing of

the Y

ear

(511,1

67,05

7) (28

2,419

,793)

199,3

34,31

4 (20

5,210

,441)

8,935

,854

83,73

4,741

5,1

60,09

4 20

0,006

,593

547,3

22

1,686

,567

Cash

and C

ash E

quiva

lents

at the

End o

f the Y

ear

(396,6

88,97

1) (51

1,167

,057)

(282,4

19,79

3) 19

9,334

,314

(205,2

10,44

1) (19

9,173

) 83

,734,7

41

5,160

,094

200,0

06,59

3 54

7,322



16.3 Audit Report and Financial Statements as at March 31, 2009

ASMI/SK/NPR/DRK

INDEPENDENT AUDITORS’ REPORT TO THE SHAREHOLDERS OF HEMAS POWER (PVT) LIMITED

Report on the Financial Statements

We have audited the accompanying financial statements of Hemas Power (Private) Limited, the consolidated financial statements of the Company and its subsidiaries which comprise the Balance Sheets as at March 31, 2009, and the Income Statements, Statements of Changes in Equity and Cash Flow Statements for the year then ended, and a summary of significant Accounting Policies and other explanatory notes.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with Sri Lanka Accounting Standards. This responsibility includes designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error, selecting and applying appropriate Accounting Policies, and making accounting estimates that are reasonable in the circumstances.

Scope of Audit and Basis of Opinion

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Sri Lanka Auditing Standards. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.

We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit. We therefore believe that our audit provides a reasonable basis for our opinion.

Opinion

In our opinion, so far as appears from our examination, the Company maintained proper accounting records for the year ended March 31, 2009 and the financial statements give a true and fair view of the Company’s state of affairs as at March 31, 2009 and its Profit and cash flows for the year then ended in accordance with Sri Lanka Accounting Standards.

In our opinion, the consolidated financial statements give a true and fair view of the state of affairs as at March 31, 2009 and the profit and cash flows for the year then ended, in accordance with Sri Lanka Accounting Standards, of the Company and its subsidiaries dealt with thereby, so far as concerns the shareholders of the Company.

Report on Other Legal and Regulatory RequirementsIn our opinion, these financial statements also comply with the requirements of Section 151 (2) and Sections 153 (2) to 153 (7) of the Companies Act No. 07 of 2007.

Colombo May 26, 2009


Audited Financial Statements | P 1


Hemas Power (Private) LimitedINCOME STATEMENTYear ended 31 March 2009 Group Company Notes 2009 2008 2009 2008 Rs. Rs. Rs. Rs.

Revenue 3 4,868,559,664 4,966,160,160 101,647,060 89,999,995

Cost of Electricity Generated (4,294,921,618) (4,369,607,381) - - Gross Profit 573,638,046 596,552,779 101,647,060 89,999,995

Other Income and Gains 4 13,903,897 89,932,557 1,891,539 70,094,529

Administrative Expenses (105,995,123) (134,199,659) (20,897,521) (12,724,102)

Finance Cost 6 (251,411,788) (257,753,540) (8,494,859) (9,061,657)

Profit Before Tax 5 230,135,033 294,532,137 74,146,219 138,308,765

Income Tax Expense 7 9,972 (29,299) - -

Profit for the Year 230,145,004 294,502,838 74,146,219 138,308,765

Earnings Per Share - Basic 8 2.37 3.58

Dividend Per Share 9 1.08 1.12

The accounting policies and notes on page 6 to 23 form an integral part of the financial statements.




Hemas Power (Private) LimitedBALANCE SHEETAs at 31 March 2009 Group Company 2009 2008 2009 2008 Notes Rs. Rs. Rs. Rs.

ASSETS

Non-Current AssetsProperty, Plant and Equipment 10 2,352,780,434 2,343,645,593 18,425,882 1,725,229Investments in Subsidiaries 11 - - 22,712,610 22,712,610Investments in Joint Ventures 12 - - 600,000,000 600,000,000Other Investments 13 - 150,433,590 - 150,433,590Goodwill 14 20,405,018 20,405,018 - - 2,373,185,452 2,514,484,201 641,138,492 774,871,429Current AssetsInventories 15 46,706,480 93,503,727 - -Trade and Other Receivables 16 999,154,320 1,047,370,460 14,144,772 7,161,109Amounts due from Related Parties 17 9,158,651 2,465,000 321,485,404 207,320,029Cash and Bank Balances 18 296,311,034 412,573,241 32,087 87,298,891 1,351,330,485 1,555,912,428 335,662,263 301,780,029Total Assets 3,724,515,937 4,070,396,629 976,800,755 1,076,651,458

EQUITY AND LIABILITIES

Stated Capital 19 939,000,020 939,000,020 939,000,020 939,000,020Preference Share Capital 19.1 99,627,453 59,313,727 - -Reserves 20 245,810,029 166,506,588 - -Retained Earnings 511,154,280 503,314,872 3,452,715 30,953,556Total Equity 1,795,591,782 1,668,135,207 942,452,735 969,953,576

Non-Current LiabilitiesInterest Bearing Loans and Borrowings 21 398,413,596 801,322,380 31,250,000 96,407,564Other Deferred Liabilities 22 776,040 630,000 776,040 630,000 399,189,636 801,952,380 32,026,040 97,037,564

Current LiabilitiesTrade and Other Payables 23 348,923,959 244,836,065 2,090,720 3,950,621Amounts due to Related Parties 24 414,174 25,610,547 - 2,145,547Interest Bearing Loans and Borrowings 21 1,170,432,188 1,310,285,687 231,260 3,564,150Provisions 25 9,964,198 19,576,743 - - 1,529,734,519 1,600,309,042 2,321,980 9,660,318Total Equity and Liabilities 3,724,515,937 4,070,396,629 976,800,755 1,076,651,458

These Financial Statements are in compliance with the requirements of the Companies Act No :07 of 2007.

……………………………Finance Officer

The board of directors is responsible for the preparation and presentation of these Financial Statements. Signed for and on behalf of the board by,

…………………………… ……………………………Director Director


Colombo26 May 2009




Hemas Power (Private) LimitedSTATEMENT OF CHANGES IN EQUITYYear ended 31 March 2009 Stated Preference Capital Exchange Overhaul Heat Rate Retained Total Note Capital Share Capital Redemption Reserve Reserve & Lube Oil Earnings Reserve Reserve Group Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.

Balance as at 1 April 2007 802,000,020 75,000,000 25,000,000 (77,412,524) 57,413,216 72,725,588 427,190,123 1,381,916,423Proceeds from New Share Issue 137,000,000 - - - - - - 137,000,000Adjustment in Respect of Group Holding - - - - - - (65,508,518) (65,508,518)Net Profit for the year - - - - - - 294,502,838 294,502,838Redemption of Preference Shares - (15,686,273) - - - - - (15,686,273)Dividends - Preference Shares - - - - - - (7,565,081) (7,565,081)Dividends - Ordinary Shares - - - - - - (89,999,995) (89,999,995)Exchange Reserve - - - 33,475,813 - - - 33,475,813Heat Rate & Lube Oil Reserve - Net - - - - - 45,235,527 (45,235,527) -Transferred to Overhaul Reserve - Net - - - - 35,068,967 - (35,068,967) -Transferred from Capital Redemption Reserve - - (25,000,000) - - - 25,000,000 -

Balance as at 31 March 2008 939,000,020 59,313,727 - (43,936,710) 92,482,183 117,961,115 503,314,872 1,668,135,207Net Profit for the year - - - - - - 230,145,004 230,145,004Redemption of Preference Shares - (15,686,273) - - - - - (15,686,273)Issue of Preference Shares - 56,000,000 - - - - - 56,000,000Dividends - Preference Shares - - - - - - (7,327,226) (7,327,226)Dividends - Ordinary Shares - - - - - - (101,647,060) (101,647,060)Exchange Reserve - - - (34,027,869) - - - (34,027,869)Heat Rate & Lube Oil Reserve - Net - - - - - 44,367,063 (44,367,063) -Transferred to Overhaul Reserve - Net - - - - 68,964,247 - (68,964,247) -Balance as at 31 March 2009 939,000,020 99,627,453 - (77,964,579) 161,446,430 162,328,178 511,154,280 1,795,591,782

Stated Retained Total Company Capital Earnings/ (Losses) Rs. Rs. Rs.

Balance as at 1 April 2007 802,000,020 (17,355,214) 784,644,806Proceeds from New Share Issue 137,000,000 - 137,000,000Profit for the year - 138,308,765 138,308,765Dividend Paid - 2007 - (89,999,995) (89,999,995) Balance as at 31 March 2008 939,000,020 30,953,556 969,953,576Profit for the year - 74,146,219 74,146,219Dividend Paid - 2008 - (101,647,060) (101,647,060)Balance as at 31 March 2009 939,000,020 3,452,715 942,452,735





Hemas Power (Private) LimitedCASH FLOW STATEMENTYear ended 31 March 2009 Group Company Note 2009 2008 2009 2008 Cash Flows From/(Used in) Operating Activities Rs. Rs. Rs. Rs.

Net Profit Before Income Tax Expense 230,135,033 294,532,137 74,146,219 138,308,765

Adjustments for Depreciation 187,479,210 184,944,530 2,485,874 910,023 Provision for Defined Benefit Plan 146,040 193,750 146,040 193,750 Write Off 14,062 - 14,062 - Finance Cost 251,411,788 257,753,540 8,494,859 9,061,657 Dividend Income - - (101,647,060) (89,999,995) Profit on Sale of Investment - (60,096,061) - (60,096,061) Interest Income (13,903,897) (29,836,496) (1,884,039) (1,059,233) Exchange Loss 54,455,198 (11,193,299) - - Transfer from Exchange Reserve (34,027,869) 33,475,813 - -Operating Profit Before Working Capital Changes 675,709,565 669,773,915 (18,244,045) (2,681,094)

Decrease/( Increase ) in Inventories 46,797,244 1,688,448 - - Decrease/( Increase ) in Trade and Other Receivables 48,216,140 (270,225,682) (7,078,462) (3,239,288) Decrease/( Increase ) in Amounts Due from Related Parties (6,693,651) 2,489,061 (114,070,575) (130,421,968) Increase/(Decrease) in Trade and Other Payables 104,097,866 86,843,718 (2,145,547) (41,896,656) Increase/(Decrease) in Amounts Due to Related Parties (25,196,373) (23,144,655) (1,859,902) 2,694,542 Decrease/( Increase ) in Provisions (9,612,545) 12,576,743 - -Cash Generated from Operations 833,318,246 480,001,548 (143,398,531) (175,544,464) Interest Paid (251,411,788) (257,753,540) (8,494,859) (9,061,657)Net Cash From/ (Used in) Operating Activities 581,906,458 222,248,008 (151,893,390) (184,606,121)

Cash Flows From/(Used in) Investing Activities Acquisition of Property, Plant and Equipment (196,628,113) (179,727,438) (19,200,590) (1,698,700) Proceeds from Sale of Property, Plant and Equipment - 1,549,375 - - Acquisition of Investments - (50,000,000) - (72,616,710) Loss on Group Share Holding Change - (18,149,550) - - Proceeds from Sale of Investments 150,433,590 103,029,380 150,433,590 103,029,381 Goodwill Paid for Acquistion of Subsidiaries - (20,405,018) - - Dividend Received - - 101,647,060 89,999,995 Interest Received 13,903,897 29,836,496 1,884,039 1,059,233Net Cash Flows/(Used in) Investing Activities (32,290,626) (133,866,755) 234,764,099 119,773,199

Cash Flows From/(Used in) Financing Activities Redemption of Preference Shares (15,686,273) (15,686,273) - - Proceeds from Issue of Ordinary Shares - 137,000,000 - 137,000,000 Proceeds from Issue of Preference Shares 56,000,000 - - - Proceeds From Interest Bearing Loans and Borrowings 509,935,271 96,407,564 60,250,000 96,407,564 Repayment of Interest Bearing Loans and Borrowings (876,412,458) (437,284,731) (125,407,564) - Dividends Paid - Preference Shares (7,327,226) (7,565,081) - - Dividends Paid - Ordinary Shares (101,647,060) (89,999,995) (101,647,060) (89,999,995)Net Cash Flows From/(Used) in Financing Activities (435,137,746) (317,128,517) (166,804,624) 143,407,569

Net Increase/(Decrease) in Cash and Cash Equivalents 114,478,086 (228,747,264) (83,933,914) 78,574,647Cash and Cash Equivalents at the Beginning of the year 18 (511,167,057) (282,419,793) 83,734,741 5,160,094Cash and Cash Equivalents at the End of the year 18 (396,688,971) (511,167,057) (199,173) 83,734,741





Hemas Power (Private) LimitedNOTES TO THE FINANCIAL STATEMENTSYear ended 31 March 2009

1. CORPORATE INFORMATION

1.1 General

Hemas Power (Private) Limited (“Company”) is a limited liability Company, incorporated and domiciled in Sri Lanka. The registered office and the principal place of business is situated at No. 36, Bristol Street, Colombo 01.

1.2 Consolidated Financial Statements

The Consolidated financial statements of the Company for the year ended 31 March 2009 comprise the Company (the ‘Company’) and all its subsidiaries (the ‘Group’).

1.3 Principal Activities and Nature of Operations

The Company was incorporated on 11th June 2003, with the objective of investing in power generating companies. As such the Company made an investment in jointly controlled entity, ‘Heladhanavi Limited’, (a 100MW power plant set up to produce independent power and transmit to feed the national grid) during 2004/05 financial year. It further acquired Giddawa Hydro Power (Private) Limited, on 23rd September 2006 and commenced its commercial operations on 23rd October 2008. In 2008 January, Hemas Power (Private) Limited acquired Okanda Power Grid (Private) Limited and the preliminary work is in progress.

1.4 Parent Enterprise and Ultimate Parent Enterprise

In the opinion of the Directors, the ultimate parent undertaking and controlling party is Hemas Holdings PLC, which is incorporated in Sri Lanka.

1.5 Date of Authorization for Issue

The Consolidated financial statements of Hemas Power (Private) Limited for the year ended 31 March 2009 were authorized for issue in accordance with a resolution of the Board of Directors on 26 May 2009.




2.1 BASIS OF PREPARATION The financial statements of the group have been prepared on a historical cost basis. The financial statements are presented in

Sri Lankan Rupees. The preparation and presentation of these financial statements is in compliance with the Companies Act No. 07 of 2007.

2.1.1 Statement of Compliance

The financial statements of the Group have been prepared in accordance with Sri Lanka Accounting Standards (SLAS).

2.1.2 Going Concern

The Directors have made an assessment of the Company’s ability to continue as a going concern and they do not intend either to liquidate or to cease trading.

2.1.3 Consolidation Policy – Principles of Consolidation

(a) Subsidiaries

The financial statements of the Group represent the consolidation of the financial statements of Hemas Power (Private) Limited and all its subsidiaries as at 31 March 2009. The financial statements of the subsidiaries are prepared for the same reporting period as the parent company using consistent accounting policies.

All intra-group balances, income and expenses and unrealised gains/losses resulting from intra-group transactions, are eliminated in full.

Subsidiaries are fully consolidated from the date of acquisition being the date on which the group obtains control and continue to be consolidated until the date that such control ceases.

(b) Joint Ventures

The Group has an interest in joint ventures which are jointly controlled entities. A joint venture is a contractual arrangement whereby two or more parties undertake an economic activity that is subject to joint control, and a jointly controlled entity is a joint venture that involves the establishment of a separate entity in which each venture has an interest. The Group recognises its interest in the joint venture using proportionate consolidation. The Group combines its share of each of the assets, liabilities, income and expenses of the joint venture with the similar items, line by line, in its consolidated financial statements. The financial statements of the joint ventures are prepared for the same reporting year as the parent company. Accounting policies of the joint ventures are consistent with the parent company.

(c) Business Combination and Goodwill

Business Combinations are accounted for using the purchase method. This involves recognising identifiable assets (including previously unrecognised intangible assets) and liabilities (including contingent liabilities and excluding future restructuring) of the acquired business at fair value.

Goodwill acquired in a business combination represents the excess of the cost of the business combination over the Group’s interest in the net fair value of the acquirer’s identifiable assets, liabilities and contingent liabilities. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses.





Negative Goodwill

Negative goodwill arising on business combinations comprises the excess of the Group’s interest in the net fair value of the acquirer’s identifiable assets, liabilities and contingent liabilities over the cost of the business combination.

Negative goodwill arising on business combinations are credited to the Income Statement.

2.1.4 Comparative Information

The accounting policies have been consistently applied by the Company and, are consistent with those used in the previous year.

Previous years’ figures and phrases have been re-arranged wherever necessary, to conform to the current year’s presentation.

2.2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2.2.1 Foreign Currency Translation

The financial statements are presented in Sri Lankan rupees, which is the Company’s functional and presentation currency. Transactions in foreign currencies are initially recorded at the functional currency rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency rate of exchange ruling at the Balance Sheet date. All differences are taken to the Income Statement.

Non monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. The resulting gains and losses are accounted for in the Income Statement.

2.2.2 Taxation

a) Current Taxes

The provision for income tax is based on the elements of income and expenditure as reported in the financial statements and computed in accordance with the provisions of the Inland Revenue Act.


Pursuant to agreement entered with BOI, profit of the Giddawa Hydro Power (Private) Ltd is exempted from Income Tax for a period of five (5) years reckoned from the year of assessment as may be determined by the Board, in which the Company commences to make profits or any year of assessment not later than two (2) years from the date of commencement of commercial operations of the Company, which ever is earlier. As such the exemption period would expire in 2012/2013.

After the expiration of aforesaid tax exemption period, the profit of the Company shall be charged at the rate of 10% for a period of two (2) years immediately succeeding the last date of the tax exemption period.

After the expiration of the aforesaid concessionary tax rate of 10%, the profits of the Company shall for any year of assessment be charged at the rate of 20%.





Heladhanavi Limited

Pursuant to the agreement dated 28 August 2003, entered into with Board of Investment under Section 17 of the Board of Investment Law, Heladhanavi Ltd., is exempt from Income Tax for a period of 10 years from the year in which the Company commences to make profits or any year of assessment not later than two years from the date of commencement of commercial operations of the enterprise, whichever is earlier. After the expiration of the said tax exemption period the income of the enterprise shall be charged at the rate of 15%. However, other operating income of the Company is liable for income tax.

Okanda Power Grid (Pvt) Limited

The Company has still not have any operations and therefore not liable for taxes. The Company has the intension of signing up an agreement with the Board of Investment of Sri Lanka and had negotiations, so that the Company will be able to obtain tax exemptions.

b) Deferred Taxation

Deferred income tax liabilities are recognized for all taxable temporary differences except, where the deferred income tax liability arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.

Deferred income tax assets are recognized for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry-forward of unused tax assets and unused tax losses can be utilized except, where the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss. The Company has not recognized the deferred income tax asset as per Sri Lanka Accounting Standards as it is not probable that sufficient taxable profit will be available against which the deductible temporary differences, and the carry-forward of unused tax assets and unused tax losses can be utilized.

For subsidiaries and joint ventures which are enjoying tax holiday period under Board of Investment Law, have not provided for any deferred taxation as per Sri Lanka Accounting Standards as they are in a tax exemption period.

2.2.3 Borrowing Costs

Borrowing costs are recognized as an expense in the period in which they are incurred, except to the extent where borrowing costs that are directly attributable to the acquisition, construction or production of an asset that takes a substantial period of time to get ready for its intended use or sale, are capitalized as part of that asset.





2.2.4 Inventories

Inventories are valued at the lower of cost and net realizable value, after making due allowances for obsolete and slow moving items. Net realizable value is the price at which inventories can be sold in the ordinary course of business less the estimated cost of completion and the estimated cost necessary to make the sale.

The cost incurred in bringing inventories to its present location and conditions are accounted using the following cost formulae;

Raw Material - At actual cost on first-in-first-out basisConsumables and Spares - At actual cost on first-in-first-out basisGoods in Transit - At actual cost

2.2.5 Trade and Other Receivables

Trade receivables are stated at the amounts they are estimated to realize net of allowances for bad and doubtful receivables.

Other receivables and dues from Related Parties are recognized at cost less allowances for bad and doubtful receivables.

2.2.6 Cash and Cash Equivalents

Cash and cash equivalents are defined as cash in hand, demand deposits and short term highly liquid investments, readily convertible to known amounts of cash and subject to insignificant risk of changes in value.

For the purpose of cash flow statement, cash and cash equivalents consist of cash in hand and deposits in banks net of outstanding bank overdrafts. Investments with short maturities i.e. three months or less from the date of acquisition are also treated as cash equivalents.

2.2.7 Property, Plant and Equipment

a) Cost

Property, Plant and Equipment is stated at cost, excluding the cost of day to day servicing, less accumulated depreciation and accumulated impairment in value. Such cost includes the cost of replacing part of the plant and equipment when that cost is incurred and the recognition criteria are met.

b) Restoration Costs

Expenditure incurred on repairs or maintenance of Property Plant and Equipment in order to restore or maintain the future economic benefits expected from originally assessed standard of performance, is recognized as an expense when incurred.





c) Depreciation

The provision for depreciation is calculated by using a straight line method on the cost of all Property, Plant and Equipment, in order to write off such amounts over the estimated useful lives. The principal annual rates used are:

Buildings 10 YearsPower Plant 15 YearsPlant Ancillary Equipment 10 YearsFire Fighting Equipment 10 YearsHydro Power Plant and Machinery 33 1/3 YearsHydro Power Civil Constructions 60 YearsComputer Accessories 3 YearsMotor Vehicles 4 - 6 YearsOffice Equipment 3 - 8 Years Furniture and Fitting 3 - 8 Years

d) Derecognition An item of Property, Plant and Equipment is derecognized upon disposal or when no future economic benefits are expected from its

use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the Income Statement in the year the asset is derecognized.

2.2.8 Capital Work-In-Progress

Capital Work-In-Progress is stated at cost. These are expenses of a capital nature directly incurred in the construction of buildings, major plant and machinery, awaiting capitalization.

2.2.9 Investments

Initial Recognition:

Cost of investment includes purchase cost and acquisition charges such as brokerages, fees, duties and bank regulatory fees. The Company distinguishes and presents current and non-current investment in the Balance Sheet.

Measurement:

a) Current Investments

Current Investments are stated at lower of cost and market value determined on an aggregate portfolio basis.

The cost of an investment is the cost of acquisition inclusive of brokerage fees and stamp duty.

Unrealized gains and losses on current investments carried at market value i.e. reduction to market value and reversals of such reductions required to reflect current investments at the lower of cost and market value, are credited or charged to Income Statement.





b) Long Term Investments

Quoted and unquoted investments (Subsidiaries and Joint Ventures) in shares held on a long term basis are stated at cost.

The cost of the investment is the cost of acquisition inclusive of brokerage fees, duties and bank fees.

The carrying amount of long-term investments is reduced to recognize a decline other than temporary in the value of investments, determined on an individual investment basis.

In the Company’s financial statements, investments in subsidiaries and joint ventures were carried at cost, net of any provision for other than temporary diminution in value.

c) Other Investments

Treasury bills and other interest bearing securities held for resale in the near future to benefit from short-term market movements are accounted for at cost plus relevant proportion of the discounts or premiums.

2.2.10 Provisions

Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past event, where it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

2.2.11 Retirement Benefit Obligations

a) Defined Contribution Plans – Mercantile Services Provident Society Fund, Employees’ Provident Fund and Employees’ Trust Fund

Employees are eligible for Mercantile Services Provident Society Fund contributions and Employees’ Trust Fund contributions in line with the respective statutes and regulations. The Company contributes 12% and 3% of gross emoluments of employees to Mercantile Services Provident Society Fund and Employees’ Trust Fund respectively. Some employees of the group are eligible for Employees’ Provident Fund, for which the group contributes 12% of gross emoluments of employees.

b) Defined Benefit Plan – Gratuity

The Company measures the present value of the promised retirement benefits of gratuity which is a defined benefit plan with the advice of an actuary using “Project Unit Credit Method”. An actuarial valuation of the gratuity liability of the Company as at 31 March 2009 was undertaken by Actuarial and Management Consultants (Private) Ltd, a firm of professional actuaries. The result of such valuation was incorporated in these Financial Statements. Key Assumptions used by the Actuary include the following;Rate of Interest 12%Rate of Salary Increase 10%Retirement Age 50 – 60 years Further, this liability is not externally funded and is included under Other Deferred Liabilities.





2.2.12 Impairment of Assets

The Group assesses at each reporting date whether there is indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for asset is required, the Group makes an estimate of the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair value less costs to sell and its value in use and is determined for an individual asset or cash-generating unit, unless the asset or cash-generating unit does not generate cash inflows that are largely independent of those from other assets or cash-generating units. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded subsidiaries or other available fair value indicators.

Impairment losses of continuing operations are recognized in the Income Statement in those expense categories consistent with the function of the impairment asset, except for property previously revalued where the revaluation was taken to equity. In this case the impairment is also recognized in equity up to the amount of any previous revaluation.

For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the Group makes an estimate of recoverable amount. A previously recognized impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognized. If that is the case the carrying amount of the asset is increased to its recoverable value. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in the Income Statement unless the asset is carried at revalued amount, in which case the reversal is treated as a revaluation increase, Impairment losses recognized in relation to goodwill are not reversed for subsequent increases in its recoverable amount.

The following criteria are also applied in assessing impairment of specific assets:

Goodwill

Goodwill is reviewed for impairment, annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired.

Impairment is determined for goodwill by assessing the recoverable amount of the cash-generating unit (or group of cash generating units), to which the goodwill relates. Where the recoverable amount of the cash-generating unit (or group of cash generating units) is less than the carrying amount of the cash-generating unit (or group of cash generating units) to which goodwill has been allocated, an impairment loss is recognized. Impairment losses relating to goodwill cannot be reversed in future periods. The Group performs its annual impairment test of goodwill as at 31 March.

2.2.13 Revenue Recognition

Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue and associated costs incurred or to be incurred can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable net of trade discounts and sales taxes and after eliminating intra-group sales. The following specific criteria are used for the purpose of recognition of revenue.





a) Energy SuppliedRevenue from energy supplied is recognized upon delivery of energy to Ceylon Electricity Board.

Heladhanavi Limited will adjust for capacity charge for Minimum Guaranteed Energy Amount (MGEA) at the end of the operational year if there has been a curtailment. (Delivery of electrical energy shall be completed when electrical energy meets the specifications as set out in Power Purchase Agreement (PPA) received at the metering point.)

b) InterestInterest income is recognized as the interest accrued unless collectability is in doubt.

c) DividendsDividend income is recognized on a cash basis. (Net of dividend tax)

d) OthersOther income is recognized on an accrual basis.





Group Company 2009 2008 2009 2008 3. REVENUE Rs. Rs. Rs. Rs.

Supply of Electricity 4,825,022,992 4,950,600,654 - -Interest on CEB Delay Payments 43,536,673 15,559,505 - -Dividend Income - - 101,647,060 89,999,995 4,868,559,664 4,966,160,160 101,647,060 89,999,995

4. OTHER INCOME AND GAINS Group Company 2009 2008 2009 2008 Rs. Rs. Rs. Rs.

Interest on Fixed Deposit (FCBU) 7,400,805 19,405,479 - -Interest on Call Deposits (FCBU) 4,556,331 349,667 - -Interest Income Short-term Investments 1,946,760 1,142,115 1,891,539 1,059,233Interest Income Related Parties - 8,939,235 - 8,939,235Profit on Disposal of Investment - 60,096,061 - 60,096,061 13,903,897 89,932,557 1,891,539 70,094,529

5. PROFIT BEFORE TAX Group CompanyStated After Charging; 2009 2008 2009 2008 Rs. Rs. Rs. Rs.

Included in Cost of SalesDepreciation 184,704,754 183,268,892 - -

Included in Administrative ExpensesDepreciation 2,774,456 1,675,639 2,485,874 910,023Directors’ Emoluments 2,847,600 2,520,000 2,847,600 2,520,000Auditors’ Fees 258,309 244,332 50,000 45,000Staff Costs - Defined Contribution Plan Costs - EPF and ETF 1,996,470 1,503,710 1,032,808 693,610 - Defined Benefit Plan Costs - Gratuity 146,040 193,750 146,040 193,750 - Other Staff Costs 2,847,600 1,563,564 2,847,600 1,563,564

Group Company6. FINANCE COST 2009 2008 2009 2008 Rs. Rs. Rs. Rs.

Bank Over Draft Interest 130,172,698 114,999,574 117,569 68,516Debenture Interest 2,614,921 4,143,486 - -USD Loan Interest 75,533,114 100,241,634 - -Rupee Loan Interest 5,250,987 9,333,246 - -Other Interest Expense 37,840,067 29,035,599 8,377,289 8,993,141 251,411,788 257,753,540 8,494,859 9,061,657

7. INCOME TAX EXPENSE Group CompanyCurrent Income Tax 2009 2008 2009 2008 Rs. Rs. Rs. Rs.Current Tax Expense on Local Interest Income Earned (7.1) (9,972) 29,299 - - (9,972) 29,299 - -

7.1 Reconciliation between Current Tax Expense and the Accounting Profit

Accounting Profit 230,135,033 294,532,137 74,146,219 138,308,765Income Not Subject to Tax (257,635,873) (294,532,137) (101,647,060) (138,308,765)Aggregate Allowables (1,141,506) - (1,141,506) -Aggregate Disallawables 3,306,918 - 3,306,918 -Tax Loss (25,335,429) - (25,335,429) -

Other Income (Interest Income on Rupee Investments) 55,221 82,882 - -

Current Income Tax Expense During the Year (35%) 19,327 29,299 - -Over Provision in Respect of Previous Years (29,299) - - - (9,972) 29,299 - -





8. EARNINGS PER SHARE

8.1 Basic Earnings Per Share is calculated by dividing the net profit for the year attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the year.

8.2 The following reflects the income and share data used in the Basic Earnings Per Share computation. Group 2009 2008 Rs. Rs.

Amount Used as the Numerator:Profit for the Year 230,145,004 294,502,838Less : Preference Dividends (7,327,226) (7,565,081)Net Profit Attributable to Ordinary Shareholders for Basic Earnings Per Share 222,817,779 286,937,757

Number of Ordinary Shares Used as the Denominator:Weighted Average Number of Ordinary Shares in Issue Applicable to Basic Earnings Per Share 93,900,002 80,200,002

Basic Earnings Per Share 2.37 3.58

8.3 There were no potentially dilutive ordinary shares outstanding at any time during the year.

9. DIVIDENDS PER SHARE Group 2009 2008 Rs. Rs.

Dividends Paid 101,647,060 89,999,995

Dividends Per Share 1.08 1.12

10. PROPERTY, PLANT AND EQUIPMENT

10.1 Group Balance Balance As at Additions/ Disposals/ As at Gross Carrying Amounts 01.04.2008 Transfers Transfers 31.03.2009 At Cost Rs. Rs. Rs. Rs.

Freehold Land 11,168,589 1,258,173 - 12,426,762Building at Plant 2,885,828 221,338,897 - 224,224,725Office Equipment 1,156,610 554,106 - 1,710,716Furniture and Fittings 223,877 1,627,466 (14,835) 1,836,508Power Plant 2,793,212,887 165,409,186 - 2,958,622,073Fire Fighting Equipment 1,073,879 - - 1,073,879Computer Equipment 579,495 237,054 - 816,549Motor Vehicles 4,813,735 17,039,220 - 21,852,955Total Value of Depreciable Assets 2,815,114,900 407,464,101 (14,835) 3,222,564,167

In the Course of ConstructionWork in Progress - 1,456,803 - 1,456,803Project Expenses 87,982,316 8,256,527 (86,882,316) 9,356,527Plant and Machinery 78,840,852 - (78,840,852) -Other 54,826,150 - (54,826,150) -Total Gross Carrying Amount 221,649,318 9,713,330 (220,549,318) 10,813,330

Depreciation Balance Depreciation Balance As at Charge/Reversal As at At Cost 01.04.2008 for the year Disposals 31.03.2009 Rs. Rs. Rs. Rs.

Building at Plant 865,746 885,589 - 1,751,335Office Equipment 984,413 74,846 - 1,059,259Furniture and Fittings 175,349 132,860 (773) 307,436Power Plant 686,855,630 183,988,316 - 870,843,946Fire Fighting Equipment 429,558 107,390 - 536,948Computer Equipment 323,882 190,699 - 514,581Motor Vehicles 3,484,047 2,099,510 - 5,583,557Total Depreciation 693,118,625 187,479,210 (773) 880,597,062

2009 2008 Net Book Values Rs. Rs.

Freehold Land 12,426,762 11,168,589Building at Plant 222,473,391 2,020,082Office Equipment 651,457 172,197Furniture and Fittings 1,529,072 48,528Power Plant 2,087,778,127 2,106,357,257Fire Fighting Equipment 536,930 644,320Computer Equipment 301,968 255,613Motor Vehicles 16,269,398 1,329,688 2,341,967,104 2,121,996,275In the Course of ConstructionWork in Progress 10,813,330 221,649,318Total Carrying Amount of Property, Plant and Equipment 2,352,780,434 2,343,645,593





10.2 Company Balance Additions/ Disposals/ Balance As at Transfers Transfers As at Gross Carrying Amounts 01.04.2008 31.03.2009 At Cost Rs. Rs. Rs. Rs.

Computer Accessories 579,495 228,154 - 807,649Motor Vehicles 4,345,500 16,911,500 - 21,257,000Office Equipment 126,025 501,050 - 627,075Furniture and Fittings 26,500 1,559,886 (14,835) 1,571,551Total Value of Depreciable Assets 5,077,520 19,200,590 (14,835) 24,263,275

Depreciation Balance Balance As At Charge for Disposals/ As at 01.04.2008 the year Transfers 31.03.2009 At Cost Rs. Rs. Rs. Rs.

Computer Accessories 323,882 190,452 - 514,334Motor Vehicles 3,015,812 2,099,510 - 5,115,322Office Equipment 12,597 66,199 - 78,796Furniture and Fittings - 129,713 (773) 128,940Total Depreciation 3,352,291 2,485,874 (773) 5,837,393

Net Book Values 2009 2008 Rs. Rs.

Computer Accessories 293,315 255,613Motor Vehicles 16,141,678 1,329,688Office Equipment 548,279 113,428Furniture and Fittings 1,442,611 26,500Total Carrying Amount of Property, Plant and Equipment 18,425,882 1,725,229

10.3 During the financial year, the Company acquired Property, Plant and Equipment to the aggregate value of Rs.19,200,590/- for cash. (2008 - Rs. 1,698,700/-)

Company11. INVESTMENT IN SUBSIDIARY Holding No. of Shares 2009 2008

2009 2008 2009 2008 Rs. Rs.

Giddawa Hydro Power (Private) Limited 100% 100% 999 999 99,900 99,900Okanda Power Grid (Private) Limited 100% 100% 662,513 662,513 22,612,710 22,612,710 663,512 663,512 22,712,610 22,712,610

Company12. INVESTMENT IN JOINT VENTURE Holding No. of Shares 2009 2008

2009 2008 2009 2008 Rs. Rs.

Heladhanavi Limited 47.06% 47.06% 60,000,000 60,000,000 600,000,000 600,000,000 60,000,000 60,000,000 600,000,000 600,000,000

13. OTHER INVESTMENTS - Group/Company Carrying Carrying No. of Shares Value Value 2009 2008 2009 2008

Hemas Hospitals (Private) Limited - 14,043,359 - 140,433,590Vishwa BPO (Private) Limited - 1,000,000 - 10,000,000 - 15,043,359 - 150,433,590

14. GOODWILL Group Company 2009 2008 2009 2008 Rs. Rs. Rs. Rs.

Balance at the Beginning of the Year 20,405,018 - - -Acquired Goodwill During the Year (14.1) - 20,405,018 - -Balance at the End of the Year 20,405,018 20,405,018 - -

The Company acquired Okanda Power Grid (Private) Limited in January 2008 for a total consideration of Rs. 22,612,710/-

14.1 Acquired Goodwill During the Year - Consideration on Business Acquistion - 22,612,710 - - - Net Assets Acquired - 2,207,692 - -Goodwill on Acquisition - 20,405,018 - -

15. INVENTORIES Group Company 2009 2008 2009 2008 Rs. Rs. Rs. Rs.

Fuel- at Cost 46,706,480 74,340,434 - -Goods in Transit - 19,163,293 - - 46,706,480 93,503,727 - -





16. TRADE AND OTHER RECEIVABLES Group Company 2009 2008 2009 2008 Rs. Rs. Rs. Rs.

Trade Receivables 964,762,864 1,008,734,462 - -Deposits and Prepayments 17,242,997 13,839,387 222,376 698,404Other Receivables 17,140,350 24,788,502 11,483,208 4,023,517Other Receivables - Related Parties (16.1) 8,108 8,108 2,439,188 2,439,188 999,154,320 1,047,370,460 14,144,772 7,161,109

16.1 Other Receivables - Related Parties RelationshipGiddawa Hydro Power (Private) Limited Subsidiary - - 2,431,080 2,431,080Hemas Corporate Services (Private) Limited Group Company 8,108 8,108 8,108 8,108 8,108 8,108 2,439,188 2,439,188

17. AMOUNTS DUE FROM RELATED PARTIES Group Company 2009 2008 2009 2008 Relationship Rs. Rs. Rs. Rs.

Hemas Holdings PLC Parent Company 9,158,651 2,465,000 9,158,651 -Giddawa Hydro Power (Private) Limited Subsidiary - - 304,137,029 207,320,029Okanda Power Grid (Private) Limited Subsidiary - - 8,189,724 - 9,158,651 2,465,000 321,485,404 207,320,029

18. CASH AND CASH EQUIVALENTS Group Company Components of Cash and Cash Equivalents 2009 2008 2009 2008 Rs. Rs. Rs. Rs.

18.1 Favourable Cash and Cash Equivalent BalancesCash and Bank Balances 2,855,991 138,697,962 32,087 87,298,891Call Deposits - FCBU 76,080,937 71,004,702 - -Fixed Deposits - FCBU 217,374,106 202,870,577 - - 296,311,034 412,573,241 32,087 87,298,891

18.2 Unfavourable Cash and Cash Equivalent BalancesBank Overdraft (693,000,005) (923,740,298) (231,260) (3,564,150)Total Cash and Cash Equivalents for the Purpose of Cash Flow Statement (396,688,971) (511,167,057) (199,173) 83,734,741

19. STATED CAPITAL - Group/Company 2009 2008 Number Rs. Number Rs.

Fully Paid Ordinary Shares 93,900,002 939,000,020 93,900,002 939,000,020 93,900,002 939,000,020 93,900,002 939,000,020

19.1 PREFERENCE SHARES - Group 2009 2008Redeemable Preference Shares Number Rs. Number Rs.

Balance at the Beginning of the Year 5,931,373 59,313,727 7,500,000 75,000,000Redemption of Shares (1,568,627) (15,686,273) (1,568,627) (15,686,273)Issued During the Year (19.1.2) 560,000 56,000,000 - -Balance at the End of the Year 4,922,746 99,627,453 5,931,373 59,313,727

19.1.1 Terms of Redemption of Redeemable Preference Shares

Heladhanavi Limited

12% Cumulative Redeemable Preference Shares of Rs. 200 Mn (Group Share - Rs. 94 Mn) has been issued to DFCC Bank for initial fund requirement for the construction of the plant of Heladhanavi Limited. These shares are to be redeemed by the Company in 12 equal semi-annual installments, commencing after 24 months from the first date of subscription (from December 2005).

Holders of redeemable cumulative preference shares receive a discretionary cumulative dividend on the par value of their share holding.

The holders of Voting & Non Voting Ordinary Shares are entitled to receive dividends as declared from time to time and voting share holders are entitled to one vote per share and non voting share holders are not entitle for voting at a meeting of Heladhanavi Ltd.

19.1.2 Giddawa Hydro Power (Private) Limited

Giddawa Hydro Power (Private) Limited issued 560,000 5% cumulative redeemable non-voting preference shares of Rs. 100/- each to Hemas Holdings PLC (350,000 shares) and Hemas Pharmaceuticals (Private) Limited (210,000 shares) during the year.

The preference shares do not carry the right to vote.

19.1.3 Restrictions on the Distributions of Dividends

Heladhanavi has undertaken not to declare any dividend without the prior consent of the lead Bank (Hatton National Bank) under the Syndicated Facility Agreement during the Grace Period and thereafter.





20. RESERVES Group Company 2009 2008 2009 2008 Rs. Rs. Rs. Rs.

Exchange Reserve (77,964,579) (43,936,710) - -Overhaul Reserve (20.1) 161,446,430 92,482,183 - -Heat Rate & Lube Oil Reserve (20.2) 162,328,178 117,961,115 - - 245,810,029 166,506,588 - -

20.1 Overhaul Reserve comprises amounts set aside by the Directors of Heladhanavi for the purpose of meeting the need based variable O&M tariff requirements in accordance with the Operation and Maintanance Agreement with Lakdhanavi Limited.

20.2 In accordance with the Operation and Maintanace Agreement Heat Rate & Lube Oil Reserve created to pay to operater or (receipt) to owner of that value as at the end of the agreement period, if there is differerence in guaranteed Fuel & Lube Oil consumption & actual Fuel & Lube oil consumption.

21. INTEREST BEARING LOANS AND BORROWINGS

Group 2009 2009 2008 2008 Amount Amount Amount Amount Repayable Repayable 2009 Repayable Repayable 2008 Within 1 year After 1 year Total Within 1 year After 1 year Total Rs. Rs. Rs. Rs. Rs. Rs.

Debentures (21.1) 8,556,149 6,417,112 14,973,261 8,556,149 14,973,261 23,529,410Long Term US$ Syndicated Loan (21.2) 374,758,393 339,296,483 714,054,876 349,753,947 666,412,144 1,016,166,091Long-term Rupee Loan (21.3) 23,529,410 - 23,529,410 28,235,293 23,529,410 51,764,703Short-term Rupee Loan (21.4) - - - - - -Related Party Loans (21.5) 70,588,231 52,700,000 123,288,232 - 96,407,564 96,407,564Bank Overdraft (18.2) 693,000,005 - 693,000,005 923,740,298 - 923,740,298 1,170,432,188 398,413,596 1,568,845,784 1,310,285,687 801,322,380 2,111,608,066

Company 2009 2009 2008 2008 Amount Amount Amount Amount Repayable Repayable 2009 Repayable Repayable 2008 Within 1 year After 1 year Total Within 1 year After 1 year Total Rs. Rs. Rs. Rs. Rs. Rs.

Related Party Loan - Hemas Holdings PLC - 31,250,000 31,250,000 - 96,407,564 96,407,564Bank Overdraft (18.2) 231,260 - 231,260 3,564,150 - 3,564,150 231,260 31,250,000 31,481,260 3,564,150 96,407,564 99,971,714

21.1 Debentures As at New Issues Redemption As at 01.04.2008 during the year 31.03.2009 Rs. Rs. Rs. Rs.

15.75% Unsecured Subordinated Redeemable Fixed Rate Debenture 23,529,410 - (8,556,149) 14,973,261 23,529,410 - (8,556,149) 14,973,261

SecurityHeladanavi Limited (Joint Venture) was not required by National Savings Bank to furnish any security for the Debentures issued by them.

Terms of RedemptionGrace period for the repayment of the loan is 18 months from the date of disbursement and equal capital repayments over 66 months thereafter.

The Reason for the IssueThese debentures were issued to finance the cost of the project and carry an interest of 15.75% per annum, payable half-yearly in arrears.

21.2 Long Term US$ Syndicated Loan - Heladhanavi Limited As at Loans Repayments Exchange As at 01.04.2008 Obtained Gain/(Loss) 31.03.2009 Rs. Rs. Rs. Rs. Rs.

Long Term US$ Loan 1,016,166,091 - (356,566,413) 54,455,198 714,054,876 1,016,166,091 - (356,566,413) 54,455,198 714,054,876Rate of Interest(a) In 2004, Heladhanavi Limited (Joint Venture) entered into an Interest Rate SWAP Agreement with Hatton National Bank, fixed interest rate 5.15% plus 3% per annum for US$ 36.5 Mn.

(Group Share - US$ 18.25 Mn)

(b) Floating Interest Rate: Three months London Inter Bank Offer Rate (LIBOR) plus 3% per annum applicable for balance US$ 2.5 Mn. - Interest payable quarterly during the grace period and thereafter monthly.

(c) In 2008, the Company entered into another Interest Rate SWAP Agreement with Commercial Bank of Ceylon PLC, to obtain a reverse position against the original SWAP with Hatton National Bank PLC, fixing the interest rate at 2.7%, if one month LIBOR is at or greater than 1.5%.

However, if one month LIBOR is less than 1.5%, then Company will have to pay to the Commercial Bank of Ceylon PLC, the difference between one month LIBOR and 2.7% (fixed interest rate).

SecurityImmovable assets have been secured against US$ 4 Mn loan and; movable assets, assignment of book debts, all shares of Heladhanavi and project documents have been secured against balance US$ 35 Mn loan.

FacilityThe US$ 39 Mn syndicated loan facility was obtained from Hatton National Bank, Commercial Bank of Ceylon Ltd, People’s Bank, Bank of Ceylon, Seylan Bank Ltd, Sampath Bank Ltd, DFCC Bank to finance the project and disbursements were made when it was requested by Heladhanavi to make progress payments on the project.

Terms of RepaymentThe Capital repayment of the loan commenced from June 2005 after a grace period of 18 months from the date of the first disbursement.





21. INTEREST BEARING LOANS AND BORROWINGS (Cont...)Terms and Conditions of US$ Syndicated Loan Undertaking not to declare dividends

According to the Syndicated Facility Agreement (SFA), Heladhanavi has agreed and undertaken not to declare any dividend without the prior consent of the lead bank during the grace period and thereafter.

Company has agreed and undertaken to maintain1. Long term debt equity ratio below 2 : 1 from the second year of operation onwards2. Debt Service Coverage Ratio be at least greater than one from the second year of operation3. Liquidity at 2 : 1 from the second year of operation onwards.

No payments can be made to an amount aggregating to more than US$ 100,000 or its equivalent in any currency per quarter other than project related payments and payments of dividends with the prior consent of the lead bank.

21.3 Long Term Rupee Loan As at Loans Repayments As at 01.04.2008 Obtained 31.03.2009 Rs. Rs. Rs. Rs.

Long Term Rupee Loan 51,764,703 - (28,235,293) 23,529,410 51,764,703 - (28,235,293) 23,529,410

Rate of InterestFixed interest rate: 12.75% per annum payable monthly during the grace period and thereafter.

SecurityImmovable assets of Heladhanavi has been secured against Rs. 31 Mn loan and; movable assets, assignment of book debts, 7,881,404 no. of shares of the Company and project documents have been secured against balance Rs. 269 Mn loan obtained.

FacilityThe Rs. 300 Mn Rupee loan has been borrowed from National Development Bank to finance the Heladhanavi thermal power project.

Terms of RepaymentThe Capital repayment of the loan commenced from January 2005 after a grace period of 12 months from the date of the first disbursement.

21.4 Short Term Rupee Loan As at Loans As at 01.04.2008 Obtained Repayments 31.03.2009 Rs. Rs. Rs. Rs.

Short Term Rupee Loan - DFCC - 169,411,755 (169,411,755) - - 169,411,755 (169,411,755) -Heladhanavi Limited

Rate of InterestPrime lending rate

SecurityRs.100 Mn loan is secured by a further concurrent mortgage over project assets of the Company.

FacilityThe Rs. 100 Mn Working Capital Rupee loan has been borrowed from DFCC Bank at prime lending rate.

21.5 Related Party Loans As at Loans As at 01.04.2008 Obtained Repayments 31.03.2009 Rs. Rs. Rs. Rs.

Loan obtained by Hemas Power (Private) Limited from Hemas Holdings PLC 96,407,564 60,250,000 (125,407,564) 31,250,000Loan obtained by Giddawa Hydro Power (Private) Limited from Hemas Holdings PLC - 21,450,000 - 21,450,000Short Term Rupee Loan obtained by Heladhanavi Ltd from LTL Holdings - 258,823,515 (188,235,284) 70,588,231 96,407,564 340,523,515 (313,642,848) 123,288,232

22. OTHER DEFERRED LIABILITIES Group Company 2009 2008 2009 2008 Retirement Benefit Obligation - Gratuity Rs. Rs. Rs. Rs.

Balance at the beginning of the year 630,000 436,250 630,000 436,250Charge for the year 146,040 193,750 146,040 193,750Payments during the year - - - -

Balance at the end of the year 776,040 630,000 776,040 630,000





23. TRADE AND OTHER PAYABLES Group Company 2009 2008 2009 2008 Rs. Rs. Rs. Rs.

Trade Payable-Others 339,588,695 225,156,620 - -Witholding Tax Payable - 332,232 - -Income Tax payable 19,327 29,299 - -Other Payables - Related Parties (23.1) 1,071,648 85,950 1,118,644 500,082 - Others 8,244,289 19,231,965 972,076 3,450,539 348,923,959 244,836,065 2,090,720 3,950,621

23.1 Other Payables - Related Parties RelationshipHemas Holdings PLC Parent Company 345,613 - 327,128 100,575Hemas Corporate Services (Private) Limited Group Company 604,030 85,950 416,413 337,029Hemas Travels (Private) Limited Group Company 121,360 - 121,360 -Hemas Manufacturing (Private) Limited Group Company 644 - 644 27,144Giddawa Hydro Power (Private) Limited Subsidiary - - 253,098 35,334 1,071,647 85,950 1,118,644 500,082

24. AMOUNTS DUE TO RELATED PARTIES Group Company 2009 2008 2009 2008 Rs. Rs. Rs. Rs.

Hemas Holdings PLC Parent Company 414,174 4,610,547 - 2,145,547Hemas Pharmaceutical (Private) Limited Group Company - 21,000,000 - - 414,174 25,610,547 - 2,145,547

25. PROVISIONS Group Company 2009 2008 2009 2008 Rs. Rs. Rs. Rs.

Provision for Excess Energy - 4,467,199 - -Provision for Delay Interest - on Purchase of Fuel 9,964,198 10,682,352 - -Provision for Delay Interest - under EPC/O&M Contracts - 4,427,192 - - 9,964,198 19,576,743 - -

26. ASSETS PLEDGEDThe following assets have been pledged as security for liabilities of Heladhanavi LimitedHeladhanavi Limited (The Group has 47.06% share of the Assets Pledged)

Nature of the Assets Nature of Liability Carrying Amount Carrying Amount Included under of the Assets Pledged of the Assets Pledged 2009 2008 Rs. Rs.

Immovable Assets 4,000,000 US$ 10,884,270 10,884,270 Property, Plant and Equipment (Syndicate Loan Facility)Mortgage of all the movable assets andassignment of book debts of the Company 8,133,820,730 8,090,961,137 Property, Plant and Equipment 35,000,000 US$Share Certificates of the Company (Syndicate Loan Facility) 1,200,000,070 1,200,000,070 Stated Capital

Assignment of the project documents

Immovable assets Rs.30,769,230 10,884,270 10,884,270 Property, Plant and Equipment (Rupee Loan Facility)

Mortgage of all the movable assets and Rs.269,230,769 8,133,820,730 8,090,961,137 Property, Plant and Equipmentassignment of book debts of the Company (Rupee Loan Facility)

Share certificates of the of the Company Rs.400,000,000 1,200,000,070 1,200,000,070 Stated Capital (Working Capital Loan)Assignment of the project documents



}

}Audited Financial Statements | P 21


27. EVENTS OCCURRING AFTER THE BALANCE SHEET DATE

There have been no material events occurring after the Balance Sheet date that require adjustments to or disclosure in the financial statements.

28. COMMITMENTS AND CONTINGENCIES

Heladhanavi Limited (The Group has 47.06% share of the below commitments and contingencies)

28.1 Power Purchase Agreement with Ceylon Electricity Board

If Heladhanavi Limited fails to supply Minimum Guaranteed Energy Amount (MGEA), which is 698,417,280 kWh per year, if there is a shortfall;

Shortfall Amount of liquidated damages for each kWh of shortfall

Exceeding 10% of MGEA upto 25% of MGEA 15% of capacity chargesExceeding 25% of MGEA 25% of capacity charges

28.2 Fuel Supply Agreement with Ceylon Petroleum Corporation

If Heladhanavi is unable to accept fuel under supply schedule (subject to change) and/or comply with its obligations under this agreement and costs, expenses, damages and losses incurred as a direct and exclusive result of such failure or inability should be paid by the company within 30 days. However, company’s liability under this agreement is limited to a maximum of US$ 500,000 per annum.

According to the clause 3.5 (C) of fuel supply agreement, Heladhanavi Limited has established a Letter of Credit at Hatton National Bank in favour of Ceylon Petroleum Corporation to the value of Rs. 280 Mn.

28.3 Operations and Maintenance Agreement with Lakdhanavi Limited

According to this agreement, the fixed fee payable by Heladhanavi Limited after the final completion date is US$ 625,000 per annum paid in equal monthly instalments.

The company is liable to pay Lakdhanavi Ltd an additional sum of US$ 2,000,000 for each remaining year of the term or pro rata for part of term upon the early termination of this agreement.

A variable fee, depends on the Net Energy output generated.

28.4 Fuel Transport Agreement with LTL Projects (Private) Limited

Heladhanavi Limited has entered into a contract during the period with LTL Projects (Private) Limited for the transportation of fuel. According to the arrangement Heladhanavi needs to pay a fixed charge of US$ 10,500 per month from the date of commencement of power generation in the plant.





29. Related Party Transactions

29.1 Details of significant related party disclosures are as follows; Parent Fellow Subsidiaries Other Group Companies Joint Ventures 2009 2008 2009 2008 2009 2008 2009 2008 Nature of Transaction Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.

Corporate Guarantee Charges - 46,875 - - - - - -IT Charges 257,250 184,688 - - - - - -Inter Company Interest 7,730,361 8,939,235 - - - - - -Corporate Service Charges - - - - 988,037 318,626 - -Telephone Expenses - - - - 66,234 63,733 - -Foreign Travelling Expenses - - - - 335,684 737,355 - -Inter Company Interest Income - - - 8,939,235 - - - -Reimbursement of Expenses - - 7,054,723 33,980 - - - -Fund Transfers - - 1,135,000 - - - - -Dividend Received - - - - - - 101,647,060 89,999,995

Terms and Conditions:

Sales and Purchases of goods and/or services to related parties were made at on the basis of the price lists in force with non-related parties, but subject to approved discounts. Fees relating to rendering of services were made at agreed prices. Settlement will take place in cash.

29.2 Key management personnel compensation

The key management personnel are the members of its Board of Directors of Hemas Power (Private) Limited and its subsidiaries and joint ventures. Volume 2009 2008 Rs. Rs.

Short term non cash benefit 339,242 214,335Short term cash benefit 5,778,100 3,617,620

No other significant transactions had been taken place during the year with the parties/entities in which key management personnel or their close family members have control, joint control or significant influence.





16.4 Interim Financial Statements as at June 30, 2009

INCOME STATEMENT

Group Company 2009 2008 Change % 2009 2008 Change % For the three months ended 30th June Rs. Rs. Rs. Rs.

Revenue 765,387,320 1,319,451,540 -42% - 101,647,060 -100%

Cost of Electricity Generated (666,899,529) (1,151,902,173) -42% - - 0%

Gross Profit 98,487,791 167,549,367 -41% - 101,647,060 -100%

Other Income and Gains 3,634,060 8,647,950 -58% 1,651,841 1,606,807 3%

Administrative Expenses (29,451,033) (21,636,232) 36% (4,704,915) (4,562,811) 3%

Finance Cost (65,174,415) (71,131,619) -8% (1,957,672) (4,822,242) -59%

Profit Before Tax 7,496,403 83,429,466 -91% (5,010,746) 93,868,814 -105%

Income Tax Expense - - 0% - - 0%

Profit for the Period 7,496,403 83,429,466 -91% (5,010,746) 93,868,814 -105%

Earnings Per Share - Basic 0.06 0.87 (0.05) 1.00

Dividend Per Share - - - -

Hemas Power (Private) Limited (Currently Hemas Power Limited) Provisional and Unaudited Financial Statements



BALANCE SHEET Group CompanyAs at 30.06.2009 30.06.2008 31.03.2009 30.06.2009 30.06.2008 31.03.2009 ASSETS Rs. Rs. Rs. Rs. Rs. Rs. (Audited) (Audited)Non-Current AssetsProperty, Plant and Equipment 2,314,785,536 2,406,724,602 2,352,780,434 17,582,758 11,588,031 18,425,882Investments in Subsidiaries - - - 22,712,610 22,712,610 22,712,610Investments in Joint Ventures - - - 600,000,000 600,000,000 600,000,000Other Investments - 150,433,590 - - 150,433,590 -Goodwill 20,405,018 20,405,018 20,405,018 - - - 2,335,190,554 2,577,563,210 2,373,185,452 640,295,368 784,734,231 641,138,492Current AssetsInventories 38,823,124 79,646,752 46,706,480 - - -Trade and Other Receivables 1,019,019,037 1,002,678,823 999,154,320 16,591,301 7,321,076 14,144,772Amounts due from Related Parties 13,775,400 2,465,000 9,158,651 331,138,583 313,258,029 321,485,404Cash and Bank Balances 294,745,587 381,808,033 296,311,034 49,665 102,183,442 32,087 1,366,363,148 1,466,598,608 1,351,330,485 347,779,549 422,762,547 335,662,263Total Assets 3,701,553,702 4,044,161,818 3,724,515,937 988,074,917 1,207,496,778 976,800,755

EQUITY AND LIABILITIES

Stated Capital 939,000,020 939,000,020 939,000,020 939,000,020 939,000,020 939,000,020Preference Share Capital 91,784,316 51,470,590 99,627,453 - - -Reserves 208,858,734 219,458,447 245,810,029 - - -Retained Earnings 566,151,740 536,019,095 511,154,280 (1,558,030) 124,822,370 3,452,715Total Equity 1,805,794,810 1,745,948,152 1,795,591,782 937,441,990 1,063,822,390 942,452,735

Non-Current LiabilitiesInterest Bearing Loans and Borrowings 311,423,356 740,169,343 398,413,596 37,250,000 132,407,564 31,250,000Other Deferred Liabilities 876,040 830,550 776,040 876,040 830,550 776,040 312,299,396 740,999,893 399,189,636 38,126,040 133,238,114 32,026,040

Current LiabilitiesTrade and Other Payables 487,677,740 400,841,362 348,923,959 811,396 2,788,480 2,090,720Amounts due to Related Parties 6,854,063 26,383,019 414,174 6,326,079 7,425,030 -Interest Bearing Loans and Borrowings 1,061,082,296 1,102,627,024 1,170,432,188 5,369,412 222,764 231,260Provisions 27,845,397 27,362,368 9,964,198 - - - 1,583,459,496 1,557,213,773 1,529,734,519 12,506,887 10,436,274 2,321,980Total Equity and Liabilities 3,701,553,702 4,044,161,818 3,724,515,937 988,074,917 1,207,496,778 976,800,755

Net Assets Value Per Share 18.25 18.05 18.06 9.98 11.33 10.04

I certify that the Financial Statements have been prepared in compliance with the requirements of Companies Act No. 7 of 2007.

……………………………Finance Officer

The board of directors is responsible for the preparation and presentation of these Financial Statements. Signed for and on behalf of the board by,

…………………………… ……………………………Director DirectorColombo7 August 2009




STATEMENT OF CHANGES IN EQUITYThree Month Period Ended 30th June 2009

Stated Preference Exchange Overhaul Heat Rate Retained Total Capital Share Reserve Reserve & Lube Oil Earnings Capital Reserve Group Rs. Rs. Rs. Rs. Rs. Rs. Rs.

Balance as at 1 April 2008 939,000,020 59,313,727 (43,936,710) 92,482,183 117,961,115 503,314,872 1,668,135,206Net Profit for the year - - - - - 230,145,004 230,145,004Redemption of Preference Shares - (15,686,273) - - - - (15,686,273)Issue of Preference Shares - 56,000,000 - - - - 56,000,000Dividends - Preference Shares - - - - - (7,327,226) (7,327,226)Dividends - Ordinary Shares - - - - - (101,647,060) (101,647,060)Exchange Reserve - - (34,027,869) - - - (34,027,869)Heat Rate & Lube Oil Reserve - Net - - - - 44,367,063 (44,367,063) -Transferred to Overhaul Reserve - Net - - - 68,964,247 - (68,964,247) -

Balance as at 31 March 2009 939,000,020 99,627,453 (77,964,579) 161,446,430 162,328,178 511,154,280 1,795,591,782Net Profit for the period - - - - - 7,496,403 7,496,403Redemption of Preference Shares - (7,843,137) - - - - (7,843,137)Dividends - Preference Shares - - - - - (1,871,330) (1,871,330)Dividends - Ordinary Shares - - - - - - -Exchange Reserve - - 12,421,091 - - - 12,421,091Heat Rate & Lube Oil Reserve - Net - - - - 6,333,014 (6,333,014) -Transferred to Overhaul Reserve - Net - - - (55,705,400) - 55,705,400 -Balance as at 30 June 2009 939,000,020 91,784,316 (65,543,488) 105,741,030 168,661,192 566,151,740 1,805,794,810

Balance as at 1 April 2008 939,000,020 59,313,727 (43,936,710) 92,482,183 117,961,115 503,314,872 1,668,135,206Net Profit for the period - - - - - 83,429,466 83,429,466Redemption of Preference Shares - (7,843,137) - - - - (7,843,137)Dividends - Preference Shares - - - - - (1,823,057) (1,823,057)Dividends - Ordinary Shares - - - - - - -Exchange Reserve - - 4,049,674 - - - 4,049,674Heat Rate & Lube Oil Reserve - Net - - - - 12,085,546 (12,085,546) -Transferred to Overhaul Reserve - Net - - - 36,816,639 - (36,816,639) -Balance as at 30 June 2008 939,000,020 51,470,590 (39,887,036) 129,298,822 130,046,661 536,019,095 1,745,948,152

Stated Retained Total Capital Earnings/ (Losses) Company Rs. Rs. Rs.

Balance as at 1 April 2008 939,000,020 30,953,556 969,953,576Profit for the year - 74,146,219 74,146,219Dividend Paid - 2008 - (101,647,060) (101,647,060)Balance as at 31 March 2009 939,000,020 3,452,715 942,452,735Profit for the period - (5,010,746) (5,010,746)Balance as at 30 June 2009 939,000,020 (1,558,030) 937,441,990

Balance as at 1 April 2008 939,000,020 30,953,556 969,953,576Profit for the period - 93,868,814 93,868,814Balance as at 30 June 2008 939,000,020 124,822,370 1,063,822,390




CASH FLOW STATEMENT Group CompanyFor the three months ended 30th June 2009 2008 2009 2008 Rs. Rs. Rs. Rs.Cash Flows From/(Used in) Operating ActivitiesNet Profit before Income Tax Expense 7,496,403 83,429,466 (5,010,746) 93,868,814

Adjustments for Depreciation 48,970,715 46,218,834 898,125 128,595 Provision for Defined Benefit Plan 100,000 200,550 100,000 200,550 Finance Cost 65,174,415 71,131,619 1,957,672 4,822,242 Dividend Income - - - (101,647,060) Profit on Sale of Fixed Assets - - (1,650,000) - Interest Income (1,984,060) (8,647,950) (1,841) (1,606,807) Exchange Loss (2,162,129) 5,215,389 - - Transfer from Exchange Reserve 12,421,091 4,049,674 - -Operating Profit before Working Capital Changes 130,016,435 201,597,582 (3,706,790) (4,233,666)

Decrease/(Increase) in Inventories 7,883,353 13,856,975 - - Decrease/(Increase) in Trade and Other Receivables (19,864,717) 44,691,637 (2,446,529) (159,967) Decrease/(Increase) in Amounts due from Related Parties (4,616,749) - (9,653,179) (105,938,000) Increase/(Decrease) in Trade and Other Payables 138,753,786 156,005,294 (1,279,324) (1,162,144) Increase/(Decrease) in Amounts due to Related Parties 6,439,889 772,472 6,326,079 5,279,483 Decrease/(Increase) in Provisions 17,881,199 7,785,625 - -Cash Generated from Operations 276,493,196 424,709,586 (10,759,743) (106,214,293) Interest Paid (65,174,415) (71,131,619) (1,957,672) (4,822,242)Net Cash From/(Used in) Operating Activities 211,318,780 353,577,966 (12,717,414) (111,036,535)

Cash Flows From/(Used in) Investing Activities Acquisition of Property, Plant and Equipment (10,975,817) (109,297,843) (55,000) (9,991,395) Proceeds from Sale of Property, Plant and Equipment - - 1,650,000 - Dividend Received - - - 101,647,060 Interest Received 1,984,060 8,647,950 1,841 1,606,807Net Cash Flows/(Used in) Investing Activities (8,991,757) (100,649,893) 1,596,841 93,262,472

Cash Flows From/(Used in) Financing Activities Redemption of Preference Shares (7,843,137) (7,843,137) - - Proceeds from Interest Bearing Loans and Borrowings 115,134,406 36,000,000 6,000,000 36,000,000 Repayment of Interest Bearing Loans and Borrowings (174,080,165) (60,145,092) - - Dividends paid Preference Shares (1,871,330) (1,823,057) - -Net Cash Flows From/(Used in) Financing Activities (68,660,225) (33,811,287) 6,000,000 36,000,000

Net Increase/(Decrease) in Cash and Cash Equivalents 133,666,798 219,116,787 (5,120,573) 18,225,937Cash and Cash Equivalents at the beginning of the Year (396,688,971) (511,167,057) (199,173) 83,734,741Cash and Cash Equivalents at the end of the Year (263,022,174) (292,050,270) (5,319,746) 101,960,678

Analysis of Cash and Cash EquivalentsShort term Investments 292,146,337 273,776,926 - -Cash and Bank Balances 2,599,250 108,031,107 49,665 102,183,442Bank Overdrafts (557,767,761) (673,858,302) (5,369,412) (222,764) (263,022,174) (292,050,270) (5,319,746) 101,960,678




Explanatory Notes to the Financial Statements

Three Month Period Ended 30th June 2009

1 The Company was incorporated in Sri Lanka on 11th June 2003 as a limited liability company under the Companies Act No. 17 of 1982, with the objective of investing in power generating companies.

In accordance to the certificate issued by the Registrar of Companies dated 29th July 2009 Hemas Power (Private) Limited as there on, changed its name to Hemas Power Limited changing its status to a public limited liability company.

2 The interim financial statements of the Company and of the Group have been prepared on the basis of the same accounting policies and methods applied for the year ended 31st March 2009 and are in compliance with Sri Lanka Accounting Standard 35 - Interim Financial Reporting.

3 The presentation and the classification of the Financial Statements of the previous year, have been amended, where relevant, for better presentation and to be comparable with those of the current year.

4 Net assets per share have been calculated, for all periods, based on the number of shares in issue as at 30th June 2009.

5 Heladhanavi Limited declared a gross dividend of Rs. 354,156,769/- in respect of 2008/09 financial year resulting a total net dividend of Rs. 149,995,800/- attributed to Hemas Power Limited, being its share of dividend. Accordingly, the Company received a net dividend of Rs. 93,176,471/- from Heladhanavi Limited on 1st July 2009 and redistributed the same to its shareholders which resulted in a Dividend per Share of Rs. 0.99. Further, Rs. 56,819,329/- to be received from Heladhanavi Limited on or before 27th August 2009 in respect of 2009 balance dividends, which will be retained in the Company. This would improve the reserves of the Company.

6 In July 2009, Giddawa Hydro Power (Private) Limited issued 1,630,000 ordinary shares of Rs. 100/- each and 1,450,000 15% Cumulative Redeemable Non-voting Preference Shares of Rs. 100/- each to Hemas Power Limited for the Company’s total investment in Giddawa Hydro Power (Private) Limited. It further issued 250,000 15% Cumulative Redeemable Non-voting Preference Shares of Rs. 100/- each to Hemas Holdings PLC in lieu of borrowings made by Giddawa Hydro Power (Private) Limited for the project development cost.

7 There has been no significant change in the nature of the contingent liabilities, which were disclosed in the audited financial statements for the year ended 31st March 2009.

8 There have been no other events subsequent to the Balance Sheet date, which require disclosure in the interim financial statements.




Baseload Plant A baseload plant is a power plant which produces electricity at an essentially constant rate and runs continuously to take all or part of the minimum load of a system, only interrupting operations for maintenance and at times when the generation of the same is not required by CEB due to various reasons.

Capacity The amount of electric power delivered or required for which a generator, turbine, transformer, transmission circuit, station or system is rated by the manufacturer.

Circuit A conductor or a system of conductors through which electric current flows.

Commercial Operation Commercial operation begins when control of the loading of the generator is turned over to the system dispatcher.

Combined Cycle An electric generating technology in which electricity is produced from otherwise lost waste heat exiting from one or more gas (combustion) turbines. The exiting heat is routed to a conventional boiler or to a heat recovery steam generator for utilisation by a steam turbine in the production of electricity. This process increases the efficiency of the electric generating unit.

Gas Turbine Plant A plant in which the prime mover is a gas turbine. A gas turbine consists typically of an axial-flow air compressor, one or more combustion chambers, where liquid or gaseous fuel is burned and the hot gases are passed to the turbine and where the hot gases expand to drive the generator and are then in turn used to run the compressor.

Generation The process of producing electric energy by transforming other forms of energy; also, the amount of electric energy produced, expressed in watthours (Wh) or metric multiples of the same.

Gigawatt-hour (GWh) One Million kilowatt-hours.

Grid An electrical grid is an interconnected network for delivering electricity from suppliers to consumers.

Kilowatt (kW) One Thousand Watts.

Kilowatt-hour (kWh) One Thousand Watt-hours.

Load The amount of electric power delivered or required at any specific point or points on a system. The requirement originates at the energy-consuming equipment of the consumers.

Megawatt (MW) One Million Watts.

Megawatt-hour (MWh) One Million Watt-hours.

Must Run Facility A power plant where the power producer has operating control over the amount and timing of electrical energy to be generated by the Facility, subject only to emergencies and such directions as may be issued by CEB for the protection of its electrical system.

Peak Demand The maximum load during a specified period of time.

Plant Load Factor (PLF) The difference between the actual electricity generated and the maximum electricity generation possible at full load expressed as a percentage of the two.

Run-of-the-river A type of hydroelectric generation whereby the natural flow and elevation drop of a river are used to generate electricity without utilising a large scale dam.

Steam turbine A mechanical device that extracts thermal energy from pressurized steam, and converts it into rotary motion to drive a generator to produce electricity.

ANNEx A - glOSSARy Of AbbREVIATIONS ANd INduSTRy


Substation Facility equipment that switches, changes or regulates electric voltage.

Transmission The movement or transfer of electric energy over an interconnected group of lines and associated equipment between points of supply and points at which it is transformed for delivery to consumers, or is delivered to other electric systems. Transmission is considered to end when the energy is transformed for distribution to the consumer.

Transformer A device that transforms electricity from one voltage to another. The power coming out of the transformer cannot exceed that going in, so the output current is reduced in direct proportion to the gain in voltage.

Watt (W) A measure of unit of power.

Watt-hour (Wh) An electrical energy unit of measure equal to one watt of power supplied to, or taken from, an electric circuit steadily for one hour.

ANNEx A - glOSSARy Of AbbREVIATIONS ANd INduSTRy


3. The objects of the Company are –

(i) To carry on the business of investing in shares, stocks, options, funds, debentures, debenture stocks, bonds, obligations or securities or acquiring any other interest whatsoever in any company which is involved in the generation, transmission or distribution of power.

(ii) To plan, design, construct and operate private power generation, transmission and development projects and provide consultancy services in relation to the same.

The objects set forth in any sub-clause of this clause shall not, except when the context expressly so requires, be in any way limited or restricted by reference to or inference from the terms of any other sub-clause, or by the name of the Company. None of such sub-clauses or the objects therein specified or the powers thereby conferred shall be deemed merely subsidiary or auxiliary to the objects mentioned in any other sub clause of this clause, but the Company shall have full power to exercise all or any of the powers conferred by any part of this clause in any part of the world and notwithstanding that the business, undertaking, property or acts proposed to be transacted, acquired, dealt with or performed do not fall within the objects of any other sub-clause of this clause.

SHARES

4. (1) Subject to articles 4(2) and 4(3), of these articles, the Board may issue such shares to such persons as it thinks fit in accordance with section 51 of the Act. Where the shares confer rights other than those specified in subsection (2) of section 49 of the Act, or impose any obligation on the holder, the Board must approve the terms of issue which set out the rights and obligations attached to the shares as required by subsection (2) of section 51 of the Act.

(2) Before it issues shares, the Board must decide the consideration for which the shares will be issued. The consideration must be fair and reasonable to the Company and to all existing shareholders.

(3) Where the Company issues shares which rank equally with or prior to existing shares, those shares must unless the Company determines otherwise by Special Resolution be offered to the holders of the existing shares in a manner which would, if accepted, maintain the relative voting and distribution rights of those shareholders. The offer must remain open for acceptance for a reasonable time. The company may at a time of making said offer request the holders of existing shares who desire an allotment of shares in excess of their respective proportions to state how many of the excess shares he or she desires should any of the existing holders of shares expressly decline to accept the whole of their respective proportions. The shares so declined may be allotted in such numbers as the Directors decide or may be allotted and issued to such other persons as the Directors consider appropriate. Provided however that an issue of Redeemable Preference Shares carrying a fixed or variable coupon shall not require an offer to be made to the holders of existing shares.

(4) Subject to Article 4(1) the Board may issue any shares with any preferential rights or privileges or subject to any special terms or conditions with or without any special designation and from time to time to modify, commute, abrogate, or deal with any rights, privileges, terms conditions or designations for the time being attached to any class of shares in accordance with the provisions herewith.

ANNEx b – ExTRAcTS fROm ARTIclES Of ASSOcIATION Of THE cOmPANy

Objects

Issue of shares


(5) Nothing in these Presents contained shall preclude the Board from recognizing and acting on a renunciation of allotment of any share by the allottee thereof in favour of any other person.

(6) The rights attached to shares shall not, unless otherwise expressly provided by the terms of issue of that class, be deemed to be varied by the creation or issue of further shares ranking pari passu therewith.

5. In the event of the Directors having issued any shares which are partly paid, the Directors may

from time to time make calls upon the holders of such shares in respect of any money unpaid on their shares, subject to a period of not less than fourteen (14) days notice being given for payment.

6. The Company may give financial assistance directly or indirectly for or in connection with the acquisition of own shares and in accordance with sections 70 and 71 of the Act.

7. (1) The Company may by Special Resolution reduce its stated capital to such amount as it thinks appropriate in accordance with section 59 of the Act.

(2) The Company shall in accordance with Article 10 (vi) issue a share certificate for the number of shares consequent to such reduction in lieu of the share certificates held by the shareholder.

(3) The Company may agree to purchase or otherwise acquire its own shares with the approval of the Board.

(4) Before the Company offers or agrees to purchase its own shares, the Board of the Company should resolve that –

(i) the acquisition is in the interests of the Company;

(ii) the terms of the offer or agreement and the consideration to be paid for the shares is in the opinion of the Company’s auditors a fair value; and

(iii) it is not aware of any information that has not been disclosed to shareholders which is material to an assessment of the value of the shares, and as a result of which the terms of an offer or the consideration offered for the shares are unfair to shareholders accepting the offer.

(5) Before the Company -

(i) makes an offer to acquire shares other than in a manner which will if it is accepted in full, leave unaffected the relative voting and distribution rights of all shareholders; or

(ii) agrees to acquire shares other than in a manner which leaves unaffected the relative voting and distribution rights of all shareholders;

the Board shall resolve that the making of the offer or entry into the agreement, as the case may be, is fair to those shareholders to whom the offer is not made or with whom no agreement is entered in to.

Calls on shares

Financial assistance for the payment of shares

Reduction of stated capital

Purchase of shares by the Company



(6) The share which may be so purchased shall be cancelled immediately upon purchase.

8. (1) The Company may issue shares which are redeemable,

(i) At the option of the Company;

(ii) At the option of the holder of the share;

(iii) On a date specified in these presents;

Redemption would be for a specified consideration by the Board at the time of issue or a consideration which is calculated on a formula or to be fixed by an independent financial advisor having such qualifications as the Board may think fit.

(2) The Company may exercise the option referred to in 8(1)(i) above, only after the Board has resolved that the redemption is in the interests of the Company.

(3) Where shares are redeemed in accordance with article 8(1)(ii) and the holder of the share gives proper notice to the Company requiring the Company to redeem the share,

(i) the Company should redeem the share on the date specified in the notice or if no date is specified, on the date of the receipt of the notice;

(ii) the share should be cancelled on the date of redemption; and

(iii) from the date of redemption the former shareholder will rank as an unsecured creditor of the Company for the sum payable on redemption.

(4) Where shares are redeemed in accordance with article 8 (1) (iii) ;

(i) the Company should redeem the shares on that date;

(ii) the share is deemed to be cancelled on that date;

from the date specified in article 8 (1)(iii), the former shareholder ranks as an unsecured creditor of the Company for the sum payable on redemption.

9. (1) The Company may by Special Resolution and subject to the provisions of the Act,

(i) consolidate or split (i.e. sub divide) all or any of its shares in issue in such proportions as it may seem fit, in a manner which would leave the relative voting and distribution rights of all shareholders substantially unaffected;

(ii) capitalize any part of the amounts for the time being standing to the credit of any of the Company’s reserve accounts in a manner which would leave the relative voting and distribution rights of all shareholders substantially unaffected;

(2) The consolidation, split or capitalization shall take effect on such day as may be determined

in the said resolution or by the Board.

Redeemable shares

Consolidation, splitting and capitalization



(3) The Company shall within one month issue a share certificate for the number of shares consequent to such consolidation and split in lieu of the share certificates held by the shareholder.

(4) In the event of a shareholder becoming entitled to a fraction of a share, consequent to the consolidation, split or capitalization, the Directors shall have the power to sell such fractional entitlements and donate the proceeds therefrom to a charity of their choice.

SHARE REGISTER, SHARE CERTIFICATES AND TRANSFER AND TRANSMISSION OF SHARES

10. (i) The Company must maintain a share register, which complies with section 123 of the Act.

The share register must be kept at the registered office of the Company or any other place in Sri Lanka, notice of which has been given to the Registrar in accordance with subsection (4) of section 124 of the Act.

(ii) Where shares are to be transferred, a form of transfer signed by the holder or by his legal representative shall be delivered to the Company. The transfer must be signed by the transferee if the share imposes any liability on its holder.

(iii) (a) The Board may resolve to refuse to register a transfer of a share within six weeks of receipt of the transfer, if any amount payable to the Company in respect of the share is due but unpaid. The Board may decline to register any share in the name of more than three (03) persons as the joint holders. If the Board resolves to refuse to register a transfer for this reason, it must give notice of the refusal to the shareholder within one week of the date of the resolution.

(b) The Directors may also decline to register a transfer of a share on which the company has a lien.

(iv) The Company shall not register more than three (03) persons as joint holders (including the principal holder) of any shares (except in the case of Executors, Administrators or Heirs of a deceased member).

(v) Where a joint holder of a share dies, the remaining holders shall be treated by the Company as the holders of that share. Where the sole holder of a share dies, that shareholder’s legal representative shall be the only person recognized by the Company as having any title to or interest in the share.

(vi) Any person who becomes entitled to a share as a consequence of the death, bankruptcy or insolvency or incapacity of a shareholder may be registered as the holder of that shareholder’s shares upon making a request in writing to the Company to be so registered, accompanied by proof satisfactory to the Board of that entitlement. The Board may refuse to register a transfer under this article in the circumstances set out in article 10(iii).

(vii) Where the Company issues shares or the transfer of any shares is entered on the share register, the Company must within one month complete and have ready for delivery a share certificate in respect of the shares.



(viii) If a Share Certificate be defaced, lost or destroyed, it may be renewed on payment of such fee not exceeding Rs. 100/- and on such terms as to evidence and indemnity and the payment of out-of-pocket expenses of the Company in investigating evidence as the Directors’ think fit.

(ix) Notwithstanding anything to the contrary in these Articles, as long as the shares of the Company are quoted in the Colombo Stock Exchange or any other Licensed Stock Exchange,

(a) such shares shall be freely transferable and registration of the transfer of such listed shares shall not be subject to any restriction, save and except to the extent required for compliance with statutory requirements.

(b) The Board may register without assuming any liability therefore any transfer of shares which is in accordance with the rules and regulations in force for the time being and from time to time as laid down by such Licensed Stock Exchange and any agency whose primary object is to act as central depository for such exchange.

DIRECTORS AND SECRETARY 24. (1) The number of directors shall not be less than three (3) nor more than twelve (12) in number.

(2) The Directors shall have power at any time to appoint any person to be a director to fill a casual vacancy as an addition to the existing directors subject to the maximum number set out in article 24(1). Any Director so appointed shall hold office until the next following Annual General Meeting and shall be eligible for re-election and not be counted for article 24(6) below.

(3) A director may be appointed or removed by ordinary resolution passed at a meeting called for the purpose. The shareholders may only vote on a resolution to appoint a director if –

(a) the resolution is for the appointment of one director, or

(b) the resolution is a single resolution for the appointment of two or more persons as directors, and a separate resolution that it be so voted on has first been passed without a vote being cast against it.

(4) A director may resign by delivering a signed written notice of resignation to the registered office of the Company. Subject to section 208 of the Act, the notice is effective when it is received at the registered office or at any later time specified in the notice.

(5) A director vacates office if he –

(a) resigns in accordance with article 24 (4);

(b) is removed from office in accordance with the provisions of the Act or these articles;

(c) becomes disqualified from being a director pursuant to section 202 of the Act ;

(d) dies; or

(e) vacates office pursuant to subsection (2) of section 210 of the Act , on the ground of his age.

Appointment and removal of directors



(6) At each Annual General Meeting one half (1/2) of the Directors including Executive Directors shall retire from office by rotation. A Director retiring at a meeting shall retain office until the close of the meeting including any adjournment thereof.

(7) The directors to retire at each annual general meeting shall be those directors who, being subject to retirement by rotation, have been longest in office since their last election or appointment, but as between persons who became or were last re-elected directors on the same day the directors to retire shall (unless they otherwise agree among themselves) be determined by lot.

(8) The Company at the meeting at which a director retires in the manner aforesaid shall fill the

vacated office by electing a person thereto. A retiring Director may be re-elected.

(9) The Board shall have the power to authorize the payment and the entering into of any contract referred to in Section 216(1) of the Act to remunerate, compensate or provide any benefit to a Director or Former Director as provided for in the said Section.

25. (1) Subject to article 25(4) which relates to major transactions, the business and affairs of the

Company shall be managed by or under the direction or supervision of the Board. The Board shall have all the powers necessary for managing and for directing and supervising the management of the business and affairs of the Company.

(2) The Board may delegate to a committee of directors or to a director or employee any of its powers which it is permitted to delegate under section 186 of the Act.

(3) The directors have the duties set out in the Act, and in particular – (a) each director must act in good faith and in what he believes to be the best interest of

the Company;

(b) no director shall act or agree to the Company acting, in a manner that contravenes any provisions of the Act or these articles;

(c) (i) shall not act in a manner which is reckless or grossly negligent;

(ii) shall exercise the degree of skill and care that may reasonably be expected of a person of his knowledge and experience.

(4) The Company shall not enter into any major transaction unless such transaction is -

(a) approved by Special Resolution ;

(b) contingent on approval by Special Resolution ;

(c) consented to in writing by all the shareholders of the Company; or

(d) a transaction which the Company is expressly authorised to enter into by a provision in its articles, which was included in it at the time the Company was incorporated.

However, the above shall not apply to

(i) a transaction under which the Company gives or agrees to give a floating charge over all or any part of the property of the Company;

Power and duties of directors



(ii) a transaction entered in to by a receiver appointed pursuant to an instrument creating a floating charge over all or any part of the property of the Company;

(iii) A transaction entered into by an administrator or liquidator of the Company.

A major transaction means –

(a) the acquisition of or an agreement to acquire whether contingent or not, assets of a value which is greater than half the value of the assets of the Company before the acquisition;

(b) the disposition of the agreement to dispose of, whether contingent or not, the whole or more than half by value of the assets of the Company;

(c) a transaction which has or is likely to have the effect of the Company acquiring rights or interests or incurring obligations or liabilities of a value which is greater than half the value of the assets before acquisition; or

(d) a transaction or a series of related transactions which have the purpose or effect of substantially altering the nature of the business carried on by the Company.

In this section the reference to “Assets” include property of any kind, whether corporeal or

incorporeal.

26. (1) A director who is interested in a transaction to which the Company is a party must disclose that interest in accordance with section 192 of the Act.

(2) Subject to article 26(3), a director of the Company is interested in a transaction to which the Company is a party, if, and only if, the director –

(a) is a party to or will or may derive a material financial benefit from the transaction;

(b) has a material financial interest in another party to the transaction;

(c) is a director, officer or trustee of another party to, or person who will or may derive a material financial benefit from the transaction, not being a party or person that is –

(i) the Company’s holding company, being a holding company of which the Company is a wholly-owned subsidiary;

(ii) a wholly-owned subsidiary of the Company; or

(iii) a wholly subsidiary of a holding company of which the Company is also a wholly-owned subsidiary;

(d) is the parent, child or spouse of another party to or person who will or may derive a material financial benefit from the transaction; or

(e) is otherwise directly or indirectly materially, interested in the transaction.

Interested directors



(3) A director of the Company is not interested in a transaction to which the Company is a party, if the transaction comprises only the giving by the Company of security to a third party which has no connection with the director, at the request of the third party, in respect of a debt or obligation of the Company for which the director or another person has personally assumed responsibility in whole or in part, under a guarantee, indemnity or by the deposit of a security.

(4) Article 24(2) does not apply to any remuneration or other benefit given to a director in accordance with section 216 of the Act, or, to any insurance or indemnity provided in accordance with section 218 of the Act.

(5) A director of the Company who is interested in a transaction entered into or to be entered into by the Company, may –

(a) vote on a matter relating to the transaction;

(b) attend a meeting of directors at which a matter relating to the transaction arises and be included among the directors present at the meeting for the purpose of a quorum;

(c) sign a document relating to the transaction on behalf of the Company; and

(d) do any other thing in his capacity as a director in relation to the transaction, as if he were not interested in the transaction.

(6) A director of the Company who has information in his capacity as a director or employee of the Company which would not otherwise be available to him, must not disclose that information to any person or make use of or act on the information, except -

(a) for the purposes of the Company;

(b) as required by law; or

(c) in accordance with article 26(7).

(7) A director of the Company may disclose, make use of or act on information if—

(a) the director is first authorized to do so by the Board under article 26(8); and

(b) particulars of the authorization are entered in the interests register.

(8) The Board may authorize a director to disclose, make use of or act on information, if it is satisfied that to do so will not be likely to prejudice the Company.

(9) A director must disclose all dealings in shares of the Company in which he has a relevant interest, in accordance with sections 198, 199 and 200 of the Act.

(10) The Board may approve;

(a) the payment of any remuneration and/or the provision of other benefits by the Company to a Director for services as Director or for services rendered to the Company in any other capacity.



(b) the payment by the Company to a Director or a former Director of compensation for loss of office,

(c) the entering into of a contract to do any of the above,

if the Board is satisfied that to do so is fair to the Company.

(11) The Company may by ordinary resolution also vote extra remuneration and / or other benefits to the Directors or to any Director as may be recommended by the Board for the performance of extra services to the Company.

(12) The Directors shall also be entitled to be repaid all traveling, hotel or other expenses properly incurred by them in or with a view to the performance of their duties including attendance at Board Meetings.

(13) Nothing in these Articles shall prevent the payment to a Director of any further remuneration for services performed by him by virtue of any other office or position held by him in conjunction with his directorship.

27. A meeting of directors may determine its own procedure, to the extent that it is not governed by

these articles.

28. (1) The directors may elect one (01) of their number to be the chairperson of the Board and may determine the period for which the Chairperson is to hold office. Such Chairperson may nominate a Director to chair meetings of the Board in his absence and may change such nomination from time to time.

(2) If at any meeting of the Board the Chairperson is not present within fifteen (15) minutes of the time appointed for the commencement of the meeting, the person nominated by such chairperson shall be the chairperson of the meeting. If the aforesaid nominee is also not present within fifteen (15) minutes of the time appointed for the commencement of the meeting the meeting shall terminate.

29. (1) A director or the secretary may convene a meeting of the Board by giving notice in

accordance with this article.

(2) Not less than forty eight hours notice of a meeting of the Board must be given to every director who is in Sri Lanka.

(3) An irregularity in the notice of a meeting is waived if all directors entitled to receive notice of the meeting attend the meeting without protest as to the irregularity or if all directors entitled to receive notice of the meeting agree to the waiver.

30. A meeting of the Board may be held either—

(a) by a number of the directors who constitute a quorum being assembled together at the place, date and time appointed for the meeting; or

(b) by means of audio or audio and visual communication by which all directors participating and constituting a quorum can simultaneously hear each other throughout the meeting.

Procedure at meetings of directors

Chairperson

Notice of meeting

Methods of holding meetings



31. (1) A quorum for a meeting of the Board shall be three (03) directors, including the Chairperson of the Board or the Director nominated by the Chairperson to chair meetings of the Board in the absence of the Chairperson.

(2) No business may be transacted at a meeting of directors if a quorum is not present.

32. (1) Every director has one vote.

(2) The chairperson has a casting vote.

(3) A resolution of the Board is passed if it is agreed to by all directors present without dissent or if a majority of the votes cast on it are in favour of it.

33. (1) The Board must ensure that minutes are kept of all proceedings at meetings of the Board.

(2) Minutes which have been signed by the chairperson of the meeting at which the proceedings were held, or by the chairperson of the next succeeding meeting, shall be prima facie evidence of the proceedings.

34. (1) A resolution in writing signed or assented to by all directors entitled to receive notice of a

board meeting, is as valid and effective as if it had been passed at a meeting of the Board duly convened and held.

(2) Any such resolution may consist of several documents (including facsimile or other similar means of communication) in like form, each signed or assented to by one or more directors.

(3) A copy of any such resolution must be entered in the minute book of board proceedings.

35. (1) The Board may from time to time appoint one or more of their body to be the holder of any executive office including the office of Managing Director or Joint Managing Director or Chief Executive Officer on such terms and for such period as they may determine. A Director so appointed shall not whilst holding office, be required to hold any qualification shares but shall be subject to retirement by rotation.

(2) The appointment of any Director to the office of Managing Director or Joint Managing Director or Chief Executive Officer or any other executive office shall be subject to termination if he ceases from any cause to be a Director, but without prejudice to any claim he may have for damages for breach of any contract of service between him and the Company.

(3) An Executive Director shall be paid such remuneration as may be agreed between him and the Board. His remuneration may be by way of salary, commission, participation in profits or any combination of these methods or any other method of fixing remuneration.

(4) The Board may delegate to an Executive Director subject to any conditions or restrictions which they consider appropriate, any of their powers which can be lawfully delegated. Any such delegation may at any time be withdrawn or varied by the Board. The delegation of a power of the Board to an Executive Director does not prevent the exercise of such power by the Board.

Quorum

Voting

Minutes

Unanimous resolution

Managing Director and other executive directors



(5) (i) Any director who is abroad or is about to go abroad may at any time by notice in writing left at the office appoint any person approved by the Board to be an alternate director of the Company to act in his place during the absence abroad and the following provisions of this Article shall apply to any person so appointed.

(ii) A person appointed to be an alternate director shall not in respect of such appointment be entitled to receive any remuneration from the Company nor be required to hold any share qualification but the Board may repay an alternate director who is not a director in his own right such reasonable expenses as he may incur in attending and returning from meetings of the Board which he is entitled to attend or as he may otherwise properly incur in or about the business of the Company or may pay such allowances as they may think proper in respect of these expenses.

(iii) An alternate director shall (on his giving an address for such notice to be served upon him) be entitled to receive notices of all meetings of the Board and to attend and vote as director at any such meeting at which the director appointing him is not personally present and generally to perform all the functions of his Appointor as a Director in the absence of such Appointor.

(iv) An alternate director may be appointed for a specified period or until the happening of a specified event but he shall ipso facto cease to be an alternate director in any of the following events, that is to say;

(a) upon the return to Sri Lanka of the director in whose place he was appointed as an alternate if the appointment was for the purpose of acting as director during the Appointors absence abroad;

(b) if the director in whose place he was appointed an alternate ceases for any reason to be a director, provided that if any director retires by rotation but is re-elected at the meeting at which such retirement took effect, any appointment made by him pursuant to this Article which was in force immediately prior to his retirement shall continue to operate after his re-election as if he had not so retired;

(c) if the alternate director shall have a receiving order made against him or compounds with his creditors or is adjudicated an insolvent;

(d) if the alternate director be lunatic or becomes of unsound mind;

(e) if the appointment of the alternate director is revoked by his Appointor by a notice in writing left at the office;

(f) if the Board resolve that the appointment of the alternate director be terminated; provided that such termination shall not take effect until the expiration of thirty (30) days after the date of the resolution of the Board;

(g) is disqualified by Statute;

(v) A director shall not vote on the question of the approval of an alternate director to act for him or on the question of the termination of the appointment of such an alternate director under sub paragraph (f) of the last foregoing sub clause of this Article and if he does so his vote shall not be counted.



DISTRIBUTION AND RESERVES

37. (1) The Company may make distributions to shareholders in accordance with section 56 of the Act Subject to article 37(2), every dividend must be approved by the Board and by an ordinary resolution of shareholders. The Board must be satisfied that the Company will immediately after the distribution, satisfy the solvency test. The directors who vote in favour of a dividend must sign a certificate of solvency to that effect.

(2) The Board may from time to time approve the payment of an interim dividend or any fixed preferential dividend to shareholders, where that appears to be justified by the Company’s profits, without the need for approval by an ordinary resolution of shareholders.

(3) The Board must;

(a) be satisfied that the Company will immediately after the divided is paid under (1) or (2) above, satisfy the solvency test,

(b) ensure the directors who vote in favour of the divided must sign a certificate of solvency their opinion the Company will satisfy the solvency test immediately after the distribution is made; and

(c) obtain a certificate of solvency from the auditors.

(4) The Company is deemed to have satisfied the solvency test if-

(a) it is able to pay its debts as they fall due in the normal course of business; and

(b) the value of its assets is greater than the sum of the value of its liabilities and its stated capital.

(5) Before the Directors make any distributions, they may set aside, out of the profits of the Company, such sum as they think proper as a reserve fund or funds.

(6) Subject to the provisions of Article 37(3), the Board may authorize a distribution by way of a dividend to be paid to the shareholders according to their rights and interests in the profits and may fix the time for payment.

(7) Any dividend or interim dividend which may be authorized by the Directors, may be paid by means of cash or by the distribution of specific assets and, in particular, of paid-up shares, debentures or debenture stock of the Company or of any other company or in specie or in any one or more of such ways and where any difficulty arises in regard to the distribution, they may settle the same as they think expedient and in particular may fix the value for distribution of such specific assets or any part thereof and may determine that cash payments shall be made to any member upon the footing of the value so fixed in order to adjust the rights of all parties and may vest any such specific assets in trustees upon such trusts for the persons entitled to the dividend as may seem expedient to the Board.

(8) No shareholder shall be entitled to receive payment of any dividend or any allotment and issue of shares credited as fully paid up in respect of his shares whilst any moneys may be due or owing from him (whether alone or jointly with any other person) to the Company in respect of such share or shares or otherwise howsoever.

Distributions



(9) No dividend shall bear interest against the Company.

(10) The Directors may deduct from the dividend payable to any shareholder all sums of money due from him (whether alone or jointly with any other person) to the Company and notwithstanding that such sums shall not be payable until after the date when such dividend is payable.

(11) Unless otherwise directed any dividend may be paid by cheque or warrant sent by post to the registered address of the shareholder entitled thereto or, in the case of joint-holders, to the registered address of the joint-holder whose name stands first on the register in respect of the joint-holding; but the Company shall not be liable or responsible for the loss of any such cheque or dividend warrant sent through the post.

(12) All dividends unclaimed for one (1) year after having been declared may be invested or otherwise made use of by the Board for the benefit of the Company until claimed and the Company shall not be constituted a trustee in respect thereof. All dividends unclaimed for six (6) years after having been declared shall be forfeited and shall revert to the Company.

(13) Every dividend payable in respect of any share held by several persons jointly may be paid to and an effectual receipt given by, any one of such persons.

46. Notwithstanding anything to the contrary contained in the Articles of Association of the Company,

so long as the Company is listed on the Colombo Stock Exchange, the Company shall comply with the Rules of the Colombo Stock Exchange and the Central Depository System, which shall be in force from time to time.



List of Tables

Table 6-1 : Current Hydro and Thermal Power Generation System ............................................................................................... 22Table 6-2 : Proposed Power Generation Project Schedule ............................................................................................................ 28Table 6-3 : Electrical Energy Supplied to the Grid as a Share of the Total ..................................................................................... 29Table 6-4 : NCRE Projects with Energy Permits ............................................................................................................................ 30Table 7-1 : Average Unit Cost of IPPs ............................................................................................................................................ 36Table 7-2 : Ordinary Voting Share Ownership of HMP in Joint Venture and Subsidiaries as at July 31, 2009............................... 39Table 7-3 : Capital Structure of Joint Venture and Subsidiaries as at July 31, 2009 .................................................................... 39Table 7-4 : Dividend Payments of HMP .......................................................................................................................................... 40Table 7-5 : Property Owned by HMP Group .................................................................................................................................. 40Table 7-6 : Interest Bearing Loans and Borrowings of HMP as at July 31, 2009 ........................................................................... 41Table 7-7 : Leasehold Land held by Magal Ganga Project ............................................................................................................. 42Table 8-1 : Details of HMP Board of Directors ................................................................................................................................ 43Table 8-2 : Directors’ Shareholdings in HMP as at August 10, 2009 .............................................................................................. 45Table 8-3 : Directors’ Shareholdings in HMP Group Companies as at August 10, 2009 ................................................................ 45Table 8-4 : Other Directorships ....................................................................................................................................................... 46Table 8-5 : Directors’ Interest in Contracts ..................................................................................................................................... 48Table 8-6 : Senior Management of HMP ........................................................................................................................................ 50Table 9-1 : Electricity Generation and Average Tariff of Heladhanavi Limited ................................................................................ 52Table 9-2 : Heladhanavi Limited Plant Utilisation ........................................................................................................................... 52Table 9-3 : Electricity Generation, Revenue and Average Plant Utilisation of Giddawa SHP ......................................................... 53Table 9-4 : Summary Income Statement of HMP Group for the year ended March 31, 2005 to 2009 ........................................... 53Table 9-5 : Summary Balance Sheet of HMP Group as at March 31, 2005 to 2009 ...................................................................... 54Table 9-6 : HMP Group Gearing .................................................................................................................................................... 55Table 10-1 : Capital Structure of HMP ............................................................................................................................................. 56Table 10-2 : Shareholders of HMP ................................................................................................................................................... 56Table 10-3 : Shareholders of HMP Subsequent to the Offering ....................................................................................................... 57Table 13-1 : Transaction Costs ......................................................................................................................................................... 66Table 13-2 : Transaction Costs for Negotiable Transactions ............................................................................................................ 66Table 13-3 : Stock Market Statistics 2004 – June 2009 .................................................................................................................. 67

List of Figures

Figure 6-1 Industry Participants of the Local Power Sector ........................................................................................................... 19Figure 6-2 National Power Generation by Energy Source and Participant .................................................................................... 21Figure 6-3 Ownership Structure of Capacity Availability ................................................................................................................ 23Figure 6-4 Units Generated by Source .......................................................................................................................................... 23Figure 6-5 Geographical Dispersion of Power Stations within Sri Lanka ....................................................................................... 24Figure 6-6 Various Phases of Transmission from Generation to Distribution................................................................................. 25Figure 6-7 Electricity Consumption Per Capita ............................................................................................................................. 25Figure 6-8 GDP and Electricity Demand Growth Patterns ............................................................................................................. 26Figure 6-9 Electricity Consumption by Sector ................................................................................................................................ 27Figure 6-10 Peak Demand and Installed Capacity .......................................................................................................................... 27Figure 6-11 Forecast Demand ......................................................................................................................................................... 28Figure 7-1 Shareholding Structure of Hemas Power Group .......................................................................................................... 31Figure 7-2 Process Flow Diagram of Heladhanavi Operations ...................................................................................................... 33Figure 7-3 Profile of a Small Hydro Power Plant ........................................................................................................................... 34

ANNEx c – INdEx ON TAblES ANd fIguRES IlluSTRATEd ON THE PROSPEcTuS


ANNEx d - cOllEcTION POINTS

Copies of the Prospectus and the Application Form can be obtained free of charge from the following collection points.

Registered Office of the CompanyHemas Building36, Bristol StreetColombo 01Tel: 4731731

Registrar to the OfferingS S P Corporate Services (Private) Limited101, Inner Flower RoadColombo 03Tel: 2573894

Managers to the OfferingNDB Investment Bank Limited 40, Navam MawathaColombo 02Tel: 2300385-90

Members of the CSEAsia Securities (Private) Limited Level 21, West TowerWorld Trade CentreEchelon SquareColombo 01Tel: 2423905, 5320000; Fax: 2336018

HNB Stockbrokers (Private) LimitedLevel 06, Acuity House, 53, Dharmapala MawathaColombo 03Tel: 2206206; Fax: 2206298-9

Bartleet Mallory Stockbrokers (Private) LimitedLevel “G”, “Bartleet House”65, Braybrooke PlaceColombo 02Tel: 5220200; Fax: 2434985

J B Securities (Private) Limited150, St Joseph Street Colombo 14Tel: 2490900, 077-2490900, 077-2490901Fax: 2430070, 2446085, 2447875

Ceylinco Stockbrokers (Private) Limited “Ceylinco House”Level 969, Janadhipathi MawathaColombo 01Tel: 4714300, 4714388-9, 0777- 891871, 0777- 896064Fax: 2387228

John Keells Stockbrokers (Private) Limited130, Glennie StreetColombo 02Tel: 2326003, 2338066/7, 2342066/7, 2446694/5, 2439047/8, 4710721-4Fax: 2342068, 2326863

SC Securities (Private) Limited Lanka Securities (Private) Limited2nd Floor, 228/2, Galle Road 55, D.R. Wijewardena Mawatha Colombo 04Colombo 10 Tel: 4706757, 2554942; Fax: 4706767Tel: 4711000; Fax: 2394405


CT Smith Stockbrokers (Private) Limited 4-14, Majestic City 10, Station RoadColombo 04 Tel: 2552290-4; Fax: 2552289

Asha Phillip Securities Limited Level 4, “Millennium House”46/58, Navam MawathaColombo 02 Tel: 2429100; Fax: 2429199

Capital TRUST Securities (Private) Limited42, Sir Mohamed Macan Marker MawathaColombo 03 Tel: 5335225; Fax: 5365725

Somerville Stockbrokers (Private) Limited137, Vauxhall StreetColombo 02Tel: 2329201-5, 2332827, 2338292-3Fax: 2338291

Acuity Stockbrokers (Private) LimitedLevel 6, Acuity HouseNo. 53, Dharmapala MawathaColombo 03Tel: 2206206; Fax: 2206298/9

DP Global Securities (Private) Limited3rd Floor, Forbes & Walkers Building46/38, Navam MawathaColombo 02.Tel: 4700111, 2307366Fax: 4700112, 2307365

NDB Stockbrokers (Private) Limited5th Floor, NDB Building 40, Navam Mawatha Colombo 02Tel: 2314170-8; Fax:2314180

Trading Members Capital Alliance Securities (Private) LimitedLevel 5, “Millennium House”46/58, Nawam MawathaColombo 02Tel: 2317777; Fax: 2317788

SMB Securities (Private) LimitedLandmark Building385, Galle RoadColombo 03Tel: 5539593; Fax: 5510750

First Guardian Equities (Private) LimitedLevel 32, East TowerWorld Trade CenterColombo 01Tel: 5884400 ; Fax: 5884401

Taprobane Securities (Private) Limited10, Gothami RoadColombo 08Tel: 5328100; Fax: 5328109

Amana Securities Limited532/4F, Srikotha Lane, Galle RoadColombo 03Tel: 2372561-4; Fax: 2372565

SKM Lanka Holdings (Private) Limited377/3, Galle RoadColombo 03Tel: 2372413-4; Fax: 2372416



Bank of Ceylon Branches

Ampara District Branch Name Branch Address TelephoneAkkaraipattu Kayoom, Shopping Complex, Kalmunai, Akkaraipattu 067-2279242Ampara 115 A, D.S. Senanayaka Street, Ampara 063-2222981Hingurana Jeyalanka Building, Hingurana Jn., Hingurana 063-2240037Kalmunai 78, Kitddanki Road, Kalmunai 067-2229340Nintavur 75, Main Street, Nintavur 067-2250039Pottuvil Pottuvil Arugambay Rd., Division No. 3, Pottuvil 063-2248021Sammanthurai 49/1 C, Amparai Road, Sammanthurai 067-2260054 Anuradhapura District Branch Name Branch Address TelephoneAnuradhapura Maithripala Senanayake Mawatha, Anuradhapura 025-2222715Anuradhapura Bazaar Market Complex, Anuradhapura 025-2222160Anuradhapura N’Town New Town, Anuradhapura 025-2223685Eppawala Talawa Road, Eppawala 025-2249180Galenbindunuwewa Denzil Kobbekaduwa Mw, Galenbindunuwewa 025-2258280Galkiriyagama New Town, Galkiriyagama 025-2263062Galnewa Thambuttegama Road, Galnewa 025-2269580Horawpothana Anuradhapura Road, Horawpothana 025-2278416Ipalogama Kekirawa Road, Ipalogama 025-2264279Kahatagasdigiliya Trincomalee Road, Trincomalee 025-2247480Kebithigollawa Horawapothana Road, Kebithigollawa 025-2298680Kekirawa 3, Habarana Road, Kekirawa 025-2264280Madatugama Kekirawa / Dambulla Road, Madatugama 025-2264283Medawachchiya 36, Jaffna Road, Medawachchiya 025-2245683Meegalewa Meegallewa 025-2269609Mihintale Trincomalee Road, Mihintale 025-2266503Nochchiyagama Main Street, Nochchiyagama 025-2257880Padavi Parakramapura Padavi Parakramapura 025-2254018Pemaduwa Mannar Road, Pemaduwa 025-2223307Thambuttegama Rajanganaya Road, Thambuttegama 025-2276280Tirappana Colombo / A’Pura Road, Tirappana 025-2223352 Badulla District Branch Name Branch Address TelephoneBadulla Bank Road, Badulla 055-2222980Balleketuwa 36, Passara Road, Balleketuwa 055-2285160Bandarawela 198 B, Badulla Road, Bandarawela 057-2230014Diyatalawa 28, Chandrasiri Bldg., Badarawela Road, Diyatalawa 057-2229092Ettampitiya 21, Nuwara Eliya Road, Ettampitiya 055-2294080Girandurukotte New Town, Girandurukotte 027-2254380Haldumulla Divisional Secretariat Complex, Haldumulla 057-2268271Haputale 20, Station Road, Haputale 057-2268080Lunuwatta Padmasiri Bldg., Udapussellawa Rd, Lunuwatta 057-2232742



Mahiyangana 7, New Town, Badulla Road, Mahiyangana 055-2258195Meegahakiwula Ratnayake Complex, Meegahakivula 055-2245707Padiyatalawa Main Street, Padiyatalawa 063-2246003Uva - Paranagama Lunuatugama,Walahamulla, Uva - Paranagama 057-2246010Welimada 12,12A, Hemapala Munidasa Mw, Welimada 057-2245984 Batticaloa District Branch Name Branch Address TelephoneBatticaloa Covington Road, Batticaloa 065-2227410Chenkalady 397, Trincomalee Road, Chenkalady 065-2240492Kaluwanchikudy Main Street, Kaluwanchikudy 065-2250012Kattankudy 55, 57, Main Street, Div. No:2, Kattankudy 065-2246613Valachchenai Main Street, Valachchenai 065-2257708 Colombo District Branch Name Branch Address TelephoneAthurugiriya 70/20, Malabe Road, Athurugiriya 011-2561378Bambalapitiya 20, Galle Road, Colombo 4 011-5368439Battaramulla 75A, Main Street, Battaramulla 011-2862575Borella 71, Danister de Silva Mawatha, Colombo 8 011-4612617Borella 2nd 845, Super Market Complex, Colombo 8 011-2685140Central Bus Stand Central Bus Stand, Colombo 11 011-5365118Central Super Market 2nd Floor, Central Super Market, Colombo 11 011-2446475City Office 41, Bristol Street, Colombo 1 011-2329413Dehiwala 207, Galle Road, Dehiwala 011-2738335Dematagoda 45, 37, Kolonnawa Road, Colombo 9 011-5335594Fifth City 85, York Street, Colombo 1 011-2449646Grandpass 703, Sirimavo Bandaranaike Mw, Colombo 14 011-2448202Hanwella 133/8, Low Level Road, Hanwella 036-2253520Homagama 93, High Level Road, Homagama 011-2855059Hulftsdorp 30, St.Sebastian Hill, Colombo 12 011-2424843Hyde Park 500, T.B.Jayah Mawatha, Colombo 10 011-2687483Independent Square 30 A, Independent Avenue, Colombo 7 011-2678073Kaduwela Avissawella Road, Kaduwela 011-2537999Katubedde 605, Galle Road, Moratuwa 011-2625438Kollupitiya 28, St.Michael’s Road, Colombo 3 011-4795036Kollupitiya 2nd 409, Galle Road, Colombo 3 011-2574581Kolonnawa 681, Avissawella Road, Wellampitiya 011-5557286Kotahena 182, George R De Silva Mawatha, Colombo 13 011-2448632Kottawa 3, High Level Road, Kottawa, Pannipitiya 011-2783313Lake House D.R.Wijeyawardena Mawatha, Colombo 10 011-5363723Lake View 142, Sir.James Peiris Mawatha, Colombo 2 011-5359693Maharagama 88, High Level Road, Maharagama 011-2746146Main Street 94, Main Street, Colombo 11 011-2447198Malabe 410/1, Athurugiriya Road, Malabe 011-2760753Maradana 94, S. Mahinda Himi Mawatha, Colombo 10 011-2689403Milagiriya 248, Galle Road, Colombo 4 011-2504627



Moratuwa 707, Galle Road, Moratuwa 011-2646165Mount Lavinia 286, Galle Road, Mount Lavinia 011-2721060Narahenpita 540, Thimbirigasyaya Road, Colombo 5 011-2368514Nugegoda 174, High Level Road, Nugegoda 011-2821287Padukka 45, Hanwella Road, Padukka 011-2859112Parliament Sri Jayawardanapura, Kotte 011-2777309Pelawatta 18 A, Parliament Road, Battaramulla 011-2785550Personal 4, Bank of Ceylon Mawatha, Colombo 1 011-2446821Piliyandala 58, Moratuwa Road, Piliyandala 011-2614165Rajagiriya 608/1, Nawala Road, Rajagiriya 011-5368641Ratmalana 452, Galle Road, Ratmalana 011-2719735Regent Street National Hospital, Colombo 10 011-2697035Thimbirigasyaya 174, Havelock Road, Colombo 5 011-2594538Union Place 278, Access Tower, Colombo 2 011-2314757Visakha 133 C, Vajira Road, Colombo 4 011-2556226 Wellawatta 149/2, Galle Road, Colombo 6 011-2588941 Galle District Branch Name Branch Address TelephoneAhungalla 60, Galle Road, Ahungalla 091-2264107Ambalangoda 274, Main Street, Ambalangoda 091-2256307Baddegama 81, 83, Kumme, Baddegama 091-2292280Batapola Aluthmawatha, Batapola 091-2260405Bentota Tourist Village, Bentota 034-2275283Elpitiya Janadhipathi Mawatha, Elpitiya 091-2291280Galle 2, Light House Street, Fort, Galle 091-2232269Galle Bazaar 2, Gamini Road, Galle 091-2234478Hikkakaduwa 223, Galle Road, Hikkakaduwa 091-2277813Imaduwa Ahangama Road, Imaduwa 091-2286030Koggala Koggala, Habaraduwa 091-2283380Kuruwita 60, Ratnapura Road, Kuruwita 045-2262581Neluwa Kadihingala Road, Neluwa 091-2237530Pitigala 39, North Pitigala Road, Pitigala 091-2291205Talgaswela Elpitiya, Mapalagama Road, Talgaswela 091-2296480Tawalama 7, Egiliyagedera Watta, Tawalama 091-2224459Yakkalamulla Yakkalamulla Junction, Yakkalamulla 091-2286080 Gampaha District Branch Name Branch Address TelephoneAndiambalama 113, Minuwangoda Road, Andiambalama 011-2258184Biyagama IPZ Administrative Complex, Biyagama 011-5558970Divulupitiya 34, Negombo Road, Divulupitiya 031-2246280Gampaha 16, Rest House Road, Gampaha 033-2226051Ja-Ela 19, Negombo Road, Ja-Ela 011-5342311Kadawatha 469, Ragama Road, Kadawatha 011-2920687Kandana 41/B-1/1, Negombo Road, Kandana 011-2232398



Katunayake IPZ 436, Baseline Road, Averiwatta, Katunayake 011-2259583Kiribathgoda 201, Kandy Road, Kiribathgoda 011-2906149Kirindiwela 21, Radawana Road, Kirindiwela 033-2267280Minuwangoda Kurunegala Road, Minuwangoda 011-2295214Mirigama 12, Amaratunga Mawatha, Mirigama 033-2275975Negombo 118, Rajapakse Broadway, Negombo 031-2224711Negombo Bazaar 111, Main Street, Negombo 031-2231297Nittambuwa Market Complex, Nittambuwa 033-2287280Peliyagoda 42, Negombo Road, Peliyagoda 011-2945078Pugoda 40/1, 43, Kospitiyana, Pugoda 011-2404821Ragama 35/26, Kadawatha Road, Ragama 011-2960291Seeduwa 429,429 1/1, Negombo Road, Seeduwa 011-2259590Veyangoda 203A, Negombo Road, Veyangoda 033-2287279Wattala 520, Negombo Road, Wattala 011-5368394Welisara 540/2, Negombo Road, Welisara 011-2958485Yakkala 46, Kandy Rd., Yakkala 033-2233591 Hambantota District Branch Name Branch Address TelephoneAmbalantota 11, Wanduruppa Road, Ambalantota 047-2223280Angunakolapellasa Hungama Road, Angunakolapellasa 047-2229120Beliatta 48, Tangalle Road, Beliatta 047-2243274Hambantota 33, Tower Hill Road, Hambantota 047-2220180Kataragama 315,Tissamaharama Road, Kataragama 047-2235280Middeniya Walasmulla Road, Middeniya 047-2247280Tangalle 91/1, 91/2, Tissa Road,Tangalle 047-2240280Tissamaharama 70, Main Street,Tissamaharama 047-2237280Walasmulla 70, Beliatta Road, Walasmulla 047-2245280Weeraketiya 9, Tangalle Road ,Weeraketiya 047-2246280 Jaffna District Branch Name Branch Address TelephoneAtchuvely Central College View, RosaVeethy, Atchuvely 021-2263402Chavakachcheri VMK Building, Kandy Road, Chavakachcheri 021-2227396Chunnakam 146, KKS Road, Chunnakam 021-2223969Jaffna 476, 476A, Hospital Road, Jaffna 021-2225624Jaffna 2nd 56, Stanley Road, Jaffna 021-2226033Kankesanthurai 51, KKS Road, Mallakam 060-2212716Karainagar Post Office View, Karainagar 021-2228278Kayts Velanai, Kayts 021-2225274Manipay 174, Jaffna Road, Manipay 021-2227456Nelliady Thikkam Road, Karaveddy, Nelliady 021-2263260Point Pedro 155/10, Main Street, Point Pedro 021-2263570Thirunelveli 531, Palaly Road, Thirunelveli 021-2223948



Kalutara District Branch Name Branch Address TelephoneAgalawatta 5, Kalutara Road, Agalawatta 034-2247480Aluthgama 267, Galle Road, Aluthgama 034-2271413Bandaragama Janadhipathi Mawatha, Bandaragama 038-2290280Beruwala 165 A, Galle Road, Beruwala 034-2279899Bulathsinhala 40, Horana Road, Bulathsinhala 034-2283116Dharga Town 32, Pathga Hadjiar Road, Dharga Town 034-2275411Dodangoda 14, Tudugala, Matugama Road, Dodangoda 034-2281628Horana 87, Anguruwathota Road, Horana 034-2260152Ingiriya 20, Panadura Road, Ingiriya 034-2269280Kalutura 218, Galle Road, Kalutura South, Kalutura 034-2229804Matugama 72, Agalawatta Road, Matugama 034-2243590Panadura 21, Susantha Mawatha, Panadura 038-2243323Panadura Bazaar 21, Jayathilaka Mawatha, Panadura 038-2243324Wadduwa 557/A, Galle Road, Wadduwa 038-2232538

Kandy District Branch Name Branch Address TelephoneGalagedara 237, Rambukkana Road, Galagedara 081-2461214Galaha 59/37, Deltota Road, Galaha 081-2467213Gampola 44, Kadugannawa Road, Gampola 081-2350108Gelioya 430, Karamada, Gelioya 081-2310214Kandy 88, Dalada Veediya, Kandy 081-2223697Kandy 2nd 22, Dalada Veediya, Kandy 081-2234292Katugastota 161/A, Madawala Road, Katugastota 081-4471640Madawala 35 A2, Wattegama Road, Madawala 081-2476214Nawalapitiya 6, Gampola Road, Nawalapitiya 054-2222233Peradeniya 115/7, Sirimavo Bandaranaike Mw, Peradeniya 081-4475283Pilimatalawa 237, Kandy Road, Pilimatalawa 081-5740197 Kegalle District Branch Name Branch Address TelephoneAranayake 480, Dippitiya, Aranayake 035-2258016Avissawella 47, Dharmapala Mawatha, Avissawella 036-2222099Dehiowita 62, Main Street, Dehiowita 036-2222580Deraniyagala 4, Dehiowita Road, Deraniyagala 036-2249280Hemmathagama 86, Mawanella Road, Hemmathagama 035-2257280Kegalle 110, Colombo Road, Kegalle 035-2230600Kegalle Bazaar 681/5, Main Street, Kegalle 035-2222550Mawanella 43, Main Street, Mawanella 035-2247915Rambukkana 8A, Diyasunnatha Mawatha, Rambukkana 035-2265280Ruwanwella Public Trade Complex, Ruwanwella 036-2266280Warakapola 89 A, Main Street, Warakapola 035-2267258Yatiyantota 93, Ginigathhena Road, Yatiyantota 036-2266281



Kurunegala District Branch Name Branch Address TelephoneAlawwa 64, Giriulla Road, Alawwa 037-2278180Bingiriya 35 A, Chilaw Road, Bingiriya 032-2246107Dummalsuriya 227, Kuliyapitiya - Madampe Road, Dummalsuriya 032-2240690Galgamuwa 67, 69, Anuradhapura Road, Galgamuwa 037-2253080Giriulla Market Complex, Giriulla 037-2288080Hettipola 45, 47, Kurunegala Road, Hettipola 037-2291080Hiripitiya 15, Wariyapola Road, Hiripitiya, Nikadalupotha 037-2264080Ibbagamuwa 110, Dambulla-Kurunegala Rd, Ibbagamuwa 037-2259970Kobeigana Main Street, Kobeigana 037-2293101Kuliyapitiya 70, Madampe Road, Kuliyapitiya 037-2281280Kurunegala Commercial Complex, Kurunegala 037-2233880Kurunegala 2nd 34, Colombo Road, Kurunegala 037-2222115Maho 145, Nikaweratiya Road, Maho 037-2275280Mawathagama Super Market Complex, Mawathagama 037-2299259Melsiripura 254, Dambulla Road, Melsiripura 037-2250165Narammala 139, Negombo Road, Narammala 037-2249280Nikaweratiya Puttalam Road, Nikaweratiya 037-2260280Pannala Public Ground Road, Pannala 037-2246080Polgahawela 64, Kegalle Road, Polgahawela 037-2243280Pothuhera 96, Colombo Road, Pothuhera 037-2237619Ridigama 84, Kurunegala Road, Ridigama 037-2252080Wariyapola 1, Chilaw Road, Wariyapola 037-2267348Welpalla Agriculture Service Centre, Welpalla 031-2299512 Matale District Branch Name Branch Address TelephoneAlawathugoda 1496, Matale Rd, Alawathugoda 066-2242327Dambulla 463, Anuradhapura Road, Dambulla 066-2285270Digana 2, Digana Village, Digana 081-2375851Galewala 168, Kurunegala - Dambulla Road, Galewala 066-2289262Matale 5/2 , Trincomalee Street, Matale 066-2222262Naula 85, Matale Road, Naula 066-2246280Pallepola 19, 19/1, Akuramboda Road, Pallepola 066-2247272Rattota Matale Road, Rattota 066-2255280Talatuoya 2, Kandy Road, Talatuoya 081-2404334Udadumbara 44, 46, Mahiyangana Road, Udadumbara 081-2402317Wattegama MC Building - 1st Floor, Wattegama 081-2475838Yatawatta Yelakkare Junction, Yatawatta 066-2221084 Matara District Branch Name Branch Address TelephoneAkuressa 64, Matara Road, Akuressa 041-2283280Deniyaya 91 A , Verahena Road, Deniyaya 041-2273870Devinuwara Tangalle Road, Devinuwara 041-2222247Dickwella 28 & 28/1, Beliatta Road, Dickwella 041-2255280



Hakmana Beliatta Road, Hakmana 041-2286280Kamburupitiya School Lane, Kamburupitiya 041-2292213Matara 11, Kumaratunga Mawatha, Matara 041-2229280Matara Bazaar Gunawardena Mawatha, Matara 041-2223920Ruhunu Campus Medawatta, Matara 041-2222681Urubokka Main Street, Urubokka 041-2272280Weligama 239, Main Street, Weligama 041-2250280 Monaragala District Branch Name Branch Address TelephoneBadalkumubura 191, 191 1/1, Main Street, Badalkumubura 055-2250279Bibile 41, Mahiyangana Road, Bibile 055-2265480Buttala 23, Moneragala Road, Buttala 055-2273980Koslanda 15, Wellawaya Road, Koslanda 057-2257780Lunugala 149, Main Street, Lunugala 055-2263980Medagama Moneragala Road, Medagama 055-2265580Moneragala 401, Wellawaya Road, Moneragala 055-2276180Passara 382, Main Street, Passara 055-2288280Siyambalanduwa Pottuvil Road, Siyambalanduwa 072-2243900Thanamalwila 6, Tissa Road, Thanamalwila 047-2234080Wellawaya Tissamaharama Road, Wellawaya 055-2274880 Nuwara Eliya District Branch Name Branch Address TelephoneHatton 46, Circular Road, Hatton 051-2222015Kandapola 31, 33 , Main Street, Kandapola 052-2229636Maskeliya 66, Upcot Road, Maskeliya 052-2277280Nuwara Eliya 43, Lawson Street, Nuwara Eliya 052-2224047Padiyapelella 35, 35 1/1 Ragala Road, Padiyapelella 052-2287035Pundaluoya Ihala Dalada Veediya, Pundaluoya 051-2233205Pussellawa 500, Nuwara Eliya Road, Pussellawa 081-2478642Rikillagaskada 3, Dimbulkumbura Road, Rikillagaskada 081-2365314Talawakelle 23,25,29, Hatton Road, Talawakelle 052-2258280Walapana Ratnayake Building, Walapana 052-2279180 Polonnaruwa District Branch Name Branch Address TelephoneAralaganwila Aralaganwila 066-2279257Bakamoona Lanka Banku Mawatha, Bakamoona 066-2256680Dehiattahandiya New Town, Dehiattahandiya 027-2250287Hingurakgoda Saint Michel Bldg., Main Street, Hingurakgoda 027-2247642Jayanthipura 22nd Mile Post, Jayanthipura 027-2222266Kaduruwela 612,614 Batticaloa Road, Kaduruwela 027-2222416Medirigiriya School Junction, Medirigiriya 027-2248337Polonnaruwa New Town 286, 286/1, New Town, Polonnaruwa 027-2223009Sewagama Nandana Building, Sewagama 027-2222585



Puttalam District Branch Name Branch Address TelephoneAnamaduwa 27, 27/1, & 31, Kurunegala Road, Anamaduwa 032-2263280Chilaw Radaguru Edmund Peiris Mawatha, Chilaw 032-2223401Dankotuwa 46, 48, Kurunegala Road, Dankotuwa 031-2258180Kalpitiya 90, Main Street, Kalpitiya 032-2260702Madampe 10, Station Road, Madampe 032-2247680Madurankuliya 16 A, Main Street, Madurankuliya 032-2240020Nattandiya Kuliyapitiya Road, Nattandiya 032-2254280Puttalam 53, Kurunegala Road, Puttalam 032-2265209Waikkal Thopputhota, Waikkal 031-2277280Wennappuwa 15, Wennappuwa Junction , Wennappuwa 031-2255280 Rathnapura District Branch Name Branch Address TelephoneAyagama 38, Kalawana Road, Ayagama 045-2250080Balangoda 137, Main Street, Balangoda 045-2288390Eheliyagoda 275, Main street, Eheliyagoda 036-2259571Embilipitiya 545, New Town, Embilipitiya 047-2230980Kahawatta 746, Main Street, Kahawatta 045-2270180Kalawana 53C,53C 1/1,53C 1/2 R’pura Rd.Manana, Kalawana 045-2255280Nivitigala 72, Kalawana Road, Nivitigala 045-2279280Pelmadulla 57, Main Street, Pelmadulla 045-2274380Rakwana 51, Main Street, Rakwana 045-2246280Ratnapura 6, Dharmapala Mawatha, Ratnapura 045-2222100Ratnapura Bazaar 163, Main Street, Ratnapura 045-2222710 Trincomalee District Branch Name Branch Address TelephoneKantale 91, Akrabodhi Mawatha, Kantale 026-2234361Kinniya 27,27/1,27/2,29 Lathef Vidhan Rd, Kinniya-05 026-2236270Muttur 38, Batticaloa Road, Muttur 026-2238327Trincomalee 24, Inner Harbour Road, Trincomalee 026-2223084Trincomalee Bazaar 9, Main Street, Trincomalee 026-2223880 Wanni District Branch Name Branch Address TelephoneKilinochchi Navajeevanam Boys Home, Tharmapuram, Kilinochchi 021-2283949Mankulam Main Road Mallavie, Mankulam 071-2348783Mannar 52, Pallimunai Road, Grand Bazaar, Mannar 023-2232337Mullaitivu Paranthan Road, Pudukdiyirupu 021-2228941Vavuniya 75, Station Road, Vavuniya 024-2222141



NDB Bank Branches

Branch Name Branch Address TelephoneAnuradhapura 522/C, Maithreepala Senanayake Mw, Anuradhapura 025-4581142Athurugiriya 70/20 C, Main Street, Athurugiriya 011-2563325Avissawella 93, Ratnapura Road, Avissawella 036-2233610Badulla 242, Lower Street, Badulla 055-2231419Boralasgamuwa 49, Colombo Road, Boralasgamuwa 011-2509701Chilaw 50-52, Skyline Bldg., Colombo Road, Chilaw 032-2220107Colombo 07 103A, Dharmapala Mw, Colombo 07 011-2448448Galle Galle Chamber Bldg., Sri Gnanobasha Mw, Oroppuwatta, Galle 091-2224136Gampaha 153, Colombo Road, Gampaha 033-2225051Havelock Town 117, Havelock Rd., Colombo 05 011-2591140Homagama 64, Highlevel Road, Homagama 011-2894880Horana 135, Panadura Road, Horana 034-2265171Kadawatha 147, Kandy Road, Kadawatha 011-2926453Kalutara 290, Galle Road, Kalutara South 034-2229680Kandana 54, Negombo Road, Kandana 011-2228601Kandy 88, Kotugodalla Veediya, Kandy 081-2202776Kegalle 121/22, Dharmapala Mw, Kegalle 035-2232536Kiribathgoda 139/1, Kandy Road, Kiribathgoda 011-2907511Kohuwala 118, S De S Jayasinghe Mawatha, Kohuwela 011-2814224Kollupitiya 712, Galle Road, Colombo 03 011-2504961Kotahena 295, George R De Silva Mw, Colombo 13 011-2436169Kurunegala 6, Rajapihilla Mw, Kurunegala 037-2231952Maharagama 108 A, Highlevel Road, Maharagama 011-2745091Malabe 760, Kaduwela Road, Malabe 011-2762345Matara 60, Uyanwatte Rd,Matara 041-2231542Moratuwa 255, Galle Road, Idama, Moratuwa 011-2642021Mt Lavinia 270, Galle Road, Mt Lavinia 011-2739176Nawam Mw 42, Dhpl Bldg., Nawam Mw, Colombo 02 011-2314640Negombo 456, Main Street, Negombo 031-2220246Nugegoda 152, Nawala Rd, Nugegoda 011-2820885Panadura 319, Galle Road, Panadura 038-2241893Pelawatta 730A, Pannipitya Road, Pelawatte, Battaramulla 011-2786708Piliyandala 21, Second Cross Street, Piliyandala 011-2604600Puttalam 104, Kurunegala Road, Puttalam 032-2265529Rajagiriya 1018, Sri Jayawardenapura Rd, Ethul Kotte 011-2885790Ratmalana 143 C, “Mount City”, Galle Road, Ratmalana 011-2719361Ratnapura 32 A, Zavia Road, Ratnapura 045-2230910Wattala 378A, Negombo Road, Wattala 011-2981519Wellawatta 302, Galle Road, Colombo 06 011-2361903Wennappuwa 56/C, Main Street, Wennappuwa 031-2245431



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